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The owner of a miniature golf course that is popular with college students is trying to determine how many boxes of golf balls they should order at one time for their booming business. Due to the high loss and wear out rate of the golf balls they use, they calculated that they would need 8,000 boxes of balls each year. It costs them 20% of the cost per box to carry one box in inventory for one year. The order cost is RM3.00. The golf ball company, which ships the whole quantity ordered, offers different rates on different quantities of boxes of balls:
Range of Order Acquisition Cost
Quantities Per Box
1 to 200 RM3.00
201 to 400 RM2.75
401 + RM2.60
(a) Determine the optimum quantity to be ordered by the owner.
(b) What is the total annual material cost (TMC) for the optimum quantity?
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