Quantity Discount: Consider a quantity discount problem where the yearly demand for the product is 1065...
Quantity Discount:
Consider a quantity discount problem where the yearly demand for the product is 1065 units, the ordering cost is $30, the holding cost is 49% of the purchase price, and the price depends on the quantity as follows:
| Quantity Ordered | Purchase Price % |
| 0 to 199 units | $69 each |
| 200 to 4999 units | $45 each |
| 5000 or more | $38 each |
If the adjusted EOQ is 619 for the quantity range, 200 to 4999 units, what is the annual cost for ordering this quantity including the cost of the product. (Round the answer) (PLEASE SHOW CALCULATIONS)
Homework Answers
Adjusted EOQ = 619
Annual unit inventory holding cost =I = 49% of $45 = $22.05
Annual inventory holding cost = I X EOQ/2 = $22.05 x 619/2 = $6824.47
Annual ordering cost = Ordering cost x Number of orders
= Ordering cost x annual demand/ EOQ
= $30 X 1065/619
= $ 51.61
Cost of product = $45 x 1065 = $47925
Total annual cost or ordering this quantity including cost of product
= $6824.47 + $51.61 + $47925
= $54801.08
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