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Annual demand for an item is 40,000 units. The holding cost rate is 30% of the item cost. Ordering costs are $60/ order. Quantity discounts are available according to the schedule below:
Quantity Price per Unit ($)
1-99 90.00
100-299 85.00
300-399 80.00
400+ 78.00
a. What is the optimal order quantity?
b. What is the total annual inventory cost of your policy?
c. Assume 52 five-day weeks per year. If the lead-time is 5 weeks, what should the reorder point be?
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