Problem : Quantity Discounts
The hospital also buys plasma for use in surgical procedures. The demand for plasma is 2,028 units per year. There is a $40 cost to place an order and the cost per unit of plasma to hold it in inventory for the year is $60.
1. What is the economic order quantity?
2. For part b) assume the cost of a unit of plasma is based on the quantity ordered at one time. If less than 25 units of plasma are ordered the unit price is $60; if 26-75 units of plasma are ordered the unit price is $59.85; if 76-100 units of plasma are ordered the unit price is $59.70; and if101 or more units of plasma are ordered the unit price is $59.55.
3. What order quantity will result in the lowest total annual cost for the hospital? Be sure to show your work for full credit.