A distribution center for a sporting goods retailer places orders with manufacturers for a variety of items. Among these is a popular standard skateboard, targeted to first-time skate boarders. The regular price is $20.00, however, the manufacturer of this skateboard offers quantity discounts per the following discount schedule:
Option Plan Quantity Discount
A 1 - 999 0%
B 1,000 - 2,499 0.75%
C 2,500+ 1.75%
The retailer pays $111 each time it places an order with the manufacturer. Holding costs are negligible (none) but they do earn 6% annual interest on all cash balances (meaning there will be an financial opportunity cost when they put cash into inventory). Annual demand is expected to be 27,500 units.
Based on this information, which quantity discount plan should they select? (In the answer field below, write the number that corresponds to your answer. Do not put a period after the number.)
1. Option Plan A
2. Option Plan B
3. Option Plan C
For this selected option, what will be the adjusted order quantity? (Display your answer to the nearest whole number.)
What will be the annual holding cost for this option? (Display your answer to the nearest whole number.)
What will be the total annual inventory cost for this option? (Display your answer to the nearest whole number.)