Assignment:
Problem Information:
A company has a chance to reduce their inventory cost by placing larger quantity orders using the price-break order quantity schedule below. What should their optimal order quantity be if this company purchase this single inventory item with an e-mail ordering cost of $4, a carrying cost rate of 20% of the inventory cost of the item, and an annual demand of 10,000 units?
Order Quantity(units) Price/unit($)
0 to 999 $3.00
1,000 to 1,499 $29.75
1,500 or more $29.50
1. Calculate EOQ at each price-break
2. Determine Q at each price-break
3. Plug the Q value into the total cost annual cost function to determine the total cost for eact order quantity
a. TAIC= RC +R/Q S + Q/2 kC
4. What is the optimal order quantity?
5. What is the total annual inventory cost at the optimal order quantity?