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The annual demand for an item is 10000 units. The cost to process an order is $125 and the annual inventory holding cost is 20% of item cost....

The annual demand for an item is 10000 units. The cost to process an order is $125 and the annual inventory holding cost is 20% of item cost.

Quantity Price / unit
1-9 $2.95
10-999 $2.50
1000-4999 $2.30
5000+ $1.85

a. What is the optimal order quantity, given the following price breaks for purchasing the item?
b. What price should the firm pay per unit?
c. What is the total annual cost at the optimal behavior?
d. How will your answers and decision change if the ordering cost becomes $300

Make sure that you show your calculations.

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The annual demand for an item is 10000 units. The cost to process an order is $125 and the annual inventory holding
cost is 20% of item cost.
Quantity Price / unit
1-9 $2.95
10-999 $2.50
1000-4999...

Sign up to view the full answer

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