Question

The annual demand for an item is 40,000 units. The ordering cost is $40 and the...

The annual demand for an item is 40,000 units. The ordering cost is $40 and the carrying cost is assumed to be 20% of the price.

a) What is the optimal order quantity, given the following price schedule for purchasing the item?

b) Should we take advantage of the quantity discount? Show your work.

Quantity

Price

1-1,499

$2.50 per unit

1,500 - 4,999

$2.30 per unit

5,000 or more

$2.00 per unit
Business   Operations-Management   
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