The catering manager of LaVista Hotel, Lisa Ferguson, 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 (2,000 pieces or less) her vendor quotes a price of $1.80/piece.
If she orders 2,001 to 5,000 pieces, the price drops to 1.60/piece.
5,001 to 10,000 pieces brings the price to 1.40/piece,
and 10,001 and above reduces the price to 1.25/piece.
Lisa's order costs are $200 per order, her annual holding costs are 5%, and the annual demand is 45,000 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 (round your response to the nearest whole number).
B) What is the annual holding cost (round your response to two decimal places).
C) What is the annual ordering cost (round your response to two decimal places).
D) What are the annual costs of the silverware itself with an optimal order quantity (round your response to the nearest whole number).
E) What is the total annual cost, including ordering, holding, and purchasing the silverware? (round your response to two decimal places).