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adoni [48]
1 year ago
14

For product W, a firm has an annual holding cost percentage of 20%, an ordering cost of $110 per order, and annual demand of 15,

000 units. The following price schedule applies to the firm's purchases.Units Ordered - Price Per Unit
1-250 - $30.00
251-500 - $28.00
501-750 - $26.00
751 and up - $25.00
What is the optimal order quantity?
Business
1 answer:
Rudiy271 year ago
3 0

Answer:

812.40 units

Explanation:

Given that,

Annual holding cost percentage = 20%

Ordering cost = $110 per order

Annual demand = 15,000 units

Units Ordered - Price Per Unit

1-250 - $30.00

251-500 - $28.00

501-750 - $26.00

751 and up - $25.00

Optimal order quantity:

= \sqrt{\frac{2\times Annual\ demand\times Cost\ per\ order}{Holding\ cost} }

= \sqrt{\frac{2\times 15,000\times 110}{25\times0.2} }

= \sqrt{\frac{3,300,000}{5} }

= 812.40

Therefore, the optimal order quantity is 812.40 units.

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