Question: A manufacturer of exercise equipment purchases the pulley section of
A manufacturer of exercise equipment purchases the pulley section of the equipment from a supplier who lists these prices: less than 1,000, $ 5 each; 1,000 to 3,999, $ 4.95 each; 4,000 to 5,999, $ 4.90 each; and 6,000 or more, $ 4.85 each. Ordering costs are $ 50, annual carrying costs per unit are 40 percent of purchase cost, and annual usage is 4,900 pulleys. Determine an order quantity that will minimize total cost.
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