R.C.Barker makes purchasing decisions for his company.One product that he buys costs $50 per unit when the order quantity is less than 500.When the quantity ordered is 500 or more, the price per unit drops to $48.The ordering cost is $30 per order and the annual demand is 7,500 units.The holding cost is 10 percent of the purchase cost.How many units should R.C.order to minimize his total annual inventory cost? (Round your answer to the nearest unit.)
A)300
B)306
C)500
D)200

Question

Quizplus · Accepted Answer

To minimize total annual inventory cost, R.C. should order 500 units to take advantage of the lower price per unit, which reduces both purchase and holding costs.

RCBarker Makes Purchasing Decisions for His Company