Private university buys mechanical pencils from wholesaler

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Reference no: EM132226855

The university bookstore at a prestigious private university buys mechanical pencils from a wholesaler. The wholesaler offers discounts for large orders according to the following price schedule:

Order Quantity Price Per Unit

1 to 200 $4.00

201 to 1,000 $3.60

1,001 to 2,000 $3.40

2,001 and greater $3.25

The bookstore expects an annual demand of 2,500 units. It costs $10 to place an order, and the annual cost of holding a unity in stock is 30 percent of the unit’s price. Determine the best order quantity.

Find the EOQ and also provide the lowest total cost for each price. If your order quantity results in fractional orders, just use this order quantity and do not round it up or down.

Reference no: EM132226855

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