A pencil supplier just introduced quantity discounts.The price schedule follows.
$$\begin{array} { | c | c | }
\hline \text { Order Quantity } & \text { Price per Unit } \
\hline 000 - 199 & \$ 4.00 \
200 - 399 & \$ 3.00 \
400 \text { and more } & \$ 2.00 \
\hline
\end{array}$$
XYZ store's annual demand remains at 500 units and ordering cost at $10 per order.If annual holding cost is 10 percent of the pencils' per-unit price,what order quantity should XYZ select to minimize all costs?
A) Fewer than or equal to 150 units
B) Greater than 150 units but fewer than or equal to 199 units
C) Greater than 199 units but fewer than or equal to 399 units
D) Greater than 399 units

Question

A pencil supplier just introduced quantity discounts.The price schedule follows.
$$\begin{array} { | c | c | } 
\hline \text { Order Quantity } & \text { Price per Unit } \
\hline 000 - 199 & \$ 4.00 \
200 - 399 & \$ 3.00 \
400 \text { and more } & \$ 2.00 \
\hline
\end{array}$$
XYZ store's annual demand remains at 500 units and ordering cost at $10 per order.If annual holding cost is 10 percent of the pencils' per-unit price,what order quantity should XYZ select to minimize all costs?
A) Fewer than or equal to 150 units
B) Greater than 150 units but fewer than or equal to 199 units
C) Greater than 199 units but fewer than or equal to 399 units
D) Greater than 399 units

Quizplus · Accepted Answer

Ordering 400 or more units minimizes costs due to the lowest price per unit ($2.00) and reduced holding costs.

A Pencil Supplier Just Introduced Quantity Discounts XYZ Store's Annual Demand Remains at 500 Units and Ordering