The annual demand for an item is 20,000 units. The cost to process an order is $25 and the annual inventory holding cost is $4 per item per year. Given the following price-quantity breaks for purchasing the item:                   Quantity                Price                 1-1,999                                  $2.50 per unit                 2,000 or more                       $2.40 per unit   What is the quantity you will order each time? Please provide detailed calculation of the total cost (including inventory cost and purchasing cost) for each quantity discount scenario.

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter15: Managing Short-term Assets
Section: Chapter Questions
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The annual demand for an item is 20,000 units. The cost to process an order is $25 and the annual inventory holding cost is $4 per item per year. Given the following price-quantity breaks for purchasing the item:

 

                Quantity                Price

                1-1,999                                  $2.50 per unit

                2,000 or more                       $2.40 per unit

 

What is the quantity you will order each time? Please provide detailed calculation of the total cost (including inventory cost and purchasing cost) for each quantity discount scenario.

 

 

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