Operations Management: The bookstore at Tech
The bookstore at Tech purchases jackets emblazoned with the school name and logo from a vendor. The vendor sells the jackets to the store for $38 apiece. The cost to the bookstore for placing an order is $120, and the annual carrying cost is 25% of the cost of a jacket. The bookstore manager estimates that 1700 jackets will be sold during the year. The vendor has offered the bookstore the following volume discount schedule:
Order Size Discount
1-299 0%
300-499 2%
500-799 4%
800+ 5%
What is the bookstore's optimal order quantity, given this quantity discount information?