Emily Ford, the manager of a college bookstore, purchases polo shirts from a local vendor with the

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Emily Ford, the manager of a college bookstore, purchases polo shirts from a local vendor with the college name and logo printed on them. Emily purchases these t-shirts from the vendor at a cost of US$20 per shirt. The bookstore incurs an ordering cost of US$80 per order, and the annual holding cost is 20% of the purchase cost of a polo shirt. Emily estimates that the demand for the polo shirts for the upcoming year will be 2,000 shirts. The vendor is willing to offer quantity discounts to the bookstore according to the following schedule:

Order Quantity Discount 0 to 499 0% 500 to 799 3% 700 to 999 4% 1,000+ 5%


Given this quantity discount schedule, what is the optimal quantity of polo shirts that Emily should order, and what would be the total annual cost at this optimal order quantity?

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Related Book For  book-img-for-question

Operations Management Managing Global Supply Chains

ISBN: 978-1506302935

1st edition

Authors: Ray R. Venkataraman, Jeffrey K. Pinto

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