What order quantity would you recommend

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Reference no: EM132252439

A manager just received a new price list for boxes from a supplier. It will now cost $1.00 a box for order quantities of 801 or more, $1.10 a box for 200 to 800, and $1.20 a box for smaller quantities. Ordering cost is $40 per order and holding cost rate is 40 percent of unit cost per year. The company uses 3,600 boxes a year. The manager has suggested a “round number” order quantity of 800 boxes. The manager’s rationale is that total annual inventory cost is U-shaped and fairly flat at its minimum. Therefore, the difference in total annual cost between 800 and 801 units would be small anyway. What order quantity would you recommend? (Round your answer to the nearest whole number.)

Reference no: EM132252439

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