The catering manager of LaVista? Hotel, Lisa? Ferguson, is disturbed by the amount of silverware she is losing every week. Last Friday? night, when her crew tried to set up for a banquet for 500? people, they did not have enough knives. She decides she needs to order some more?silverware, but wants to take advantage of any quantity discounts her vendor will offer.
?For a small order (2,000 pieces or? less) her vendor quotes a price of ?$1.80 ?/piece.
?If she orders 2,001 to 5,000 ?pieces, the price drops to ?$1.60?/piece.
?5,001 to 10,000 pieces brings the price to ?$1.40?/piece,
?10,001 and above reduces the price to ?$1.25?/piece.
Lisa's order costs are ?$195 per? order, her annual holding costs are 5?%, and the annual demand is 48,500 pieces. For the best option? (the best option is the price level that results in an EOQ within the acceptable? range):
a) what is the optimal order quantity?
b) what is the annual holding cost?
c) what is the annual ordering (setup) cost?
d) what are the annual costs of the silverware itself with an optimal order quantity?
e) what is the total annual cost, including ordering, holding, and purchasing the silverware?