What is the annual cost of such policy

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Reference no: EM131124607

Prefab, a furniture manufacturer, uses 20,000 square feet of plywood per year. Its trucking company charges Prefab $400 per shipment, independent of the quantity purchased. The manufacturer offers an all unit quantity discount with a price of $1 per square foot for orders under 20,000 square feet, $0.98 per square feet, and $0.96 per square foot for orders larger than40,000 square feet. Prefab incurs a holding cost of 20%. What is the optimal lot size for Prefab? What is the annual cost of such a policy? What is the cycle inventory of plywood at prefab? How does it compare with the cycle inventory if the manufacturer does not offer a quantity discount but sells all plywood at $0.96 per square foot?

Reference no: EM131124607

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