Skip’s Scooters builds motorized hobby scooters. Although they do most of the construction in-house, they purchase motors from a small engine manufacturer. Because the motor is specially made for Skip’s, the ordering process is very detailed. The following information is available to assist managers determine how many motors to order and when to order. 

Annual usage....................................................900 motors

Cost to place an order (K).................................$50.00

Cost to carry one unit (H)..................................$25.00

Daily usage...........................................................9 motors

Lead time............................................................10 days

Price per case..................................................$150.00

The supplier has offered a quantity discount option:

Quantity....................................................Price per Motor

1–49 motors.......................................................$150

50–199 motors...................................................$145.50

200–499 motors.................................................$142.50

500–1,099 motors..............................................$139.50

1,100 + motors...................................................$135.00

Required:

A. Calculate the economic order quantity for Skip’s Scooters, current level of production.

B. Evaluate the quantity discounts offered by the supplier.

C. Determine the re-order point.

D. Make a recommendation to Skip’s Scooters’ management about the quantity to order and the re-order point. 

E. Would your recommendation change if the cost to place an order for a motor decreased to $40 per order? Would your recommendation change if the cost to place an order decreased to $35 per order but carrying costs increased to $35.00 per motor? What does this tell you about the order size?