A company based in Illinois has invented a way to make pepperoni out of soy beans, and this pepperoni product has developed a niche market among pizzerias in Anaheim. The owner, Mr. Bean, has asked his sister to serve as a local distributor and estimates that the demand for the pepperonis is fairly steady at 2000 per year. The pepperonis cost Mr. Bean $1.85 per unit to produce, and he is willing to sell them to his sister for $2.00. Due to their composition, the pepperonis must be kept refrigerated, so Ms. Bean has made arrangements with a trucking company for refrigerated shipments at a cost of $250 for up to 1000 pepperonis. It takes one week for Ms. Bean to receive to receive an order from the factory. Ms. Bean is financing the distributorship using her credit cards, and estimates that, between the interest on her credit cards and the cost of storage, her annual holding cost rate is 40%.
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