The annual demand for an item is 40,000 units. The cost to process an order is $40 and the annual inventory holding cost is $3 per item per year. What is the optimal order quantity, given the following price breaks for purchasing the item?
$\begin{array}{|l|l|}
\hline\text { Quantity } & \text { Price } \
\hline 1-1,499 & \$ 2.50 \text { per unit } \
\hline 1,500-4,999 & \$ 2.30 \text { per unit } \
\hline 5,000 \text { or more } & \$ 2.25 \text { per unit } \
\hline
\end{array}$ a. What is the optimal behaviour?
b. Does the firm take advantage of the lowest price available? Explain.

Question

The annual demand for an item is 40,000 units. The cost to process an order is $40 and the annual inventory holding cost is $3 per item per year. What is the optimal order quantity, given the following price breaks for purchasing the item?
 $\begin{array}{|l|l|}
\hline\text { Quantity } & \text { Price } \
\hline 1-1,499 & \$ 2.50 \text { per unit } \
\hline 1,500-4,999 & \$ 2.30 \text { per unit } \
\hline 5,000 \text { or more } & \$ 2.25 \text { per unit } \
\hline
\end{array}$ a. What is the optimal behaviour?
b. Does the firm take advantage of the lowest price available? Explain.

Quizplus · Accepted Answer

The Answer of The annual demand for an item is 40,000 units. The cost to process an order is $40 and the annual inventory holding cost is $3 per item per year. What is the optimal order quantity, given the following price breaks for purchasing the item?
 $\begin{array}{|l|l|}
\hline\text { Quantity } & \text { Price } \
\hline 1-1,499 & \$ 2.50 \text { per unit } \
\hline 1,500-4,999 & \$ 2.30 \text { per unit } \
\hline 5,000 \text { or more } & \$ 2.25 \text { per unit } \
\hline
\end{array}$ a. What is the optimal behaviour?
b. Does the firm take advantage of the lowest price available? Explain.

The Annual Demand for an Item Is 40,000 Units A What Is the Optimal Behaviour? B

The Annual Demand for an Item Is 40,000 Units A What Is the Optimal Behaviour?
B