As an inventory manager,you must decide on the order quantity for an item.Its annual demand is 300 units.Ordering cost is $20 each time an order is placed,and the holding cost is 30 percent of the per-unit price.Your supplier provided the following price schedule.
$$\begin{array} { | c | c | }
\hline \text { Price per Unit } & \text { Order Quantity } \
\hline \$ 6.00 & 000 - 149 \
\$ 5.00 & 150 - 199 \
\$ 4.00 & 200 \text { and more } \
\hline
\end{array}$$
What ordering-quantity policy do you recommend?
A) Fewer than or equal to 50 units
B) Greater than 50 units but fewer than or equal to 149
C) Greater than 149 units but fewer than or equal to 199 units
D) More than 199 units

Question

As an inventory manager,you must decide on the order quantity for an item.Its annual demand is 300 units.Ordering cost is $20 each time an order is placed,and the holding cost is 30 percent of the per-unit price.Your supplier provided the following price schedule.
$$\begin{array} { | c | c | } 
\hline \text { Price per Unit } & \text { Order Quantity } \
\hline \$ 6.00 & 000 - 149 \
\$ 5.00 & 150 - 199 \
\$ 4.00 & 200 \text { and more } \
\hline
\end{array}$$
What ordering-quantity policy do you recommend?
A) Fewer than or equal to 50 units
B) Greater than 50 units but fewer than or equal to 149
C) Greater than 149 units but fewer than or equal to 199 units
D) More than 199 units

Quizplus · Accepted Answer

Ordering more than 199 units allows you to purchase at the lowest price per unit ($4.00), which minimizes the total cost considering both the purchase price and the holding cost.

As an Inventory Manager,you Must Decide on the Order Quantity