Bell Computers purchases integrated chips at $350 per chip. The holding cost is $36 per unit per year, the ordering cost is $122 per order, and sales are steady at 395 per month. The company's supplier, Rich Blue Chip Manufacturing, Inc., decides to offer price concessions in order to attract larger orders. The price structure is shown below:
Rich Blue Chip's Price Structure
Quantity Purchased. Price per unit
1-99. $350
100-199. $325
200 or more. $300
A. What is the optimal order quantity and the minimum annual cost for Bell Computers to order, purchase, and hold these integrated chips?
B. Bell Computers wishes to use a 10% holding cost rather than the fixed $36 holding cost in part A. What is the optimal order quantity, and what is the optimal annual cost?