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abbiedigings abbiedigings
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6 years ago
The annual demand, ordering cost, and the annual inventory carrying cost rate for a certain item are , and I = 30 of item price. Price is established by the following quantity discount schedule.
 
  What should the order quantity be in order to minimize the total annual cost?
 
  Quantity 1 to 49 50 to 249 250 and up
  Price 5.00 per unit 4.50 per unit 4.10 per unit
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#1
6 years ago
STEP 1: EOQ at 4.10 = 139.69  infeasible
EOQ at 4.50 = 133.33  feasible
So the possible best answers are 133 and 250

STEP 2: TC for 133 units = 2,880.00
TC for 250 units = 2,661.75

Therefore, order 250 units paying 4.10 per unit. Holding costs are much larger than ordering costs, but this is offset by the unit price reduction.
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