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SteelCase Furniture Company uses steel at a fairly steady rate of 50 tons per week. Assume there are 50 weeks per year. They purchase the steel from BainBridge Steel Company at a cost of $600 per ton. SteelCase estimates that there is a fixed cost (transportation, order processing, etc.) of $1500 for every order that they place with BainBridge and uses an annual carrying cost rate of 8%. Currently, they receive an order every four weeks.
-What is the annual cost of their current ordering policy?
-What is the order quantity that would minimize their annual cost?
-Estimate the savings that SteelCase could realize by moving to the optimal policy
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