. The annual demand for an item is 40,000 units. The cost to process an order is $40 and the annual inventory holding cost is 10% of the price of each item. What is the optimal order quantity, given the following price breaks for purchasing the item?
Quantity
Price
1-1,499
$2.50 per unit
1,500 – 4,999
$2.30 per unit
5,000 or more
$2.25 per unit
a. What is the optimal quantity and minimum cost?
b. Does the firm take advantage of the lowest price available? Explain.
c. If there is no discount and daily production is 250 units and they open 250 days a year, determine:
i. Optimum quantity
ii. Length
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