What is the economic order quantity for the material


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Q: A particular raw material is available to a company at three different prices, depend­ing on the size of the order:

(1) less than 100 pounds is $20/pound,

(2) 100 pounds to 1,000 pounds is $19/pound, and

(3) more than 1,000 pounds is $18/pound.

The cost to place an order is $40. Annual demand is 3,000 pounds. Holding (or carrying cost) is 25% of the material price. What is the economic order quantity for the material?

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Operation Management: What is the economic order quantity for the material
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