Quantity Discounts The UWM Bookstore orders Panther t-shirts from a supplier. The demand for these t-shirts is 7,396 per year. There is a $20 charge for placing an order and the cost per t-shirt to hold it in inventory for the year is $2.50.
a) What is the economic order quantity?
For part b) assume the cost of the t-shirts are based on the quantity ordered at one time. If less than 100 are ordered the unit price is $4.32; if 101-999 are ordered the unit price is $4.25; if 1000 to 1249 are ordered the unit price is $4.18; and if 1250 or more are ordered the unit price is $4.11.
b) What order quantity will result in the lowest total annual cost for the UWM Bookstore? Be sure to show your work for full credit.