The catering manager of Coconuts Grill, Lulu Jones, 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 (2000 pieces or less) her vendor quotes a price of $1.80 per piece. If she orders 2000 to 5000 pieces, the price drops to $1.60per piece .5,001 to 10,000 pieces brings the price to $1.40 per piece, 10,001 and above reduces the price to $1.25 per piece. Lisa's order costs are $205 per order, her annual holding costs are 5%, and the annual demand is 41600 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 optimum ordering quantity?