Problem 1. The office manager for the Metro Life Insurance Company orders letterhead stationery from an office products firm in boxes of 500 sheets. The company uses 6,500 boxes per year. Annual carrying costs are $3.00 per box, and ordering costs are $28.00. The following discount price schedule is provided by the office supply company:
Order Quantity (boxes) Price per Box
299-999 $16.00
1,000-2,999 14.00
3,000-5,999 13.00
6,000 + 12.00
a. Determine the optimal order quantity and the total annual inventory cost.
Problem 2. Determine the optimal order quantity and total annual inventory cost for the boxes of stationery in the above problem if the carrying cost is 20% of the price of a box of stationery.