Suppose that you are the manager of a production department that uses 400 boxes of rivets per year. The supplier quotes you a price of $8.50 per box for an order size of 199 boxes or less, a price of $8.00 per box for orders of 200 to 999 boxes, and a price of $7.50 per box for an order of 1,000 or more boxes. You assign a holding cost of 20 percent of the price to this inventory. Assume ordering cost is $80/order.
You have also computed EOQ for price $8.5 to be 194; for $ 8.00 to be 200; for $7.5 to be 206.
What order quantity would you use if the objective is to minimize total annual costs of holding, purchasing, and ordering?
Show your computation for establihing your reason.