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Rocky Mountain Tire Center sells 2,000 go-cart tires per year. The ordering cost for each order is $20, and the holding cost is 35% of the purchase price of the tires per year. The purchase price is $20 per tire if fewer than 100 tires are ordered, $16.20 per tire if 100 or more – but fewer than 1,000 – tires are ordered, and $15.50 per tire if 1,000 or more tires are ordered.
a. How many tires should Rocky Mountain order each time it places an order?
b. What is purchase price it gets from the vendor at this order quantity?
c. What is the total cost under this order policy? (Hint: don’t forget the purchase cost).
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