A mail-order company operates 48 weeks a year and uses 200 boxes a week. The company incurs
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Question:
A mail-order company operates 48 weeks a year and uses 200 boxes a week. The company incurs a fixed order placement, transportation, and receiving cost of $95 each time an order is placed with the manufacturer. The holding cost is 5 percent of the cost. The manufacturer uses the following all-unit discount pricing schedule.
Order Quantity. Cost per Box100 - 199 $100
200 - 499 $75
500 or more $50- Evaluate the number of boxes that the company should order in each lot in order to minimize the total cost of inventory.
- What is the total inventory cost, including the ordering, purchasing, and holding costs?
- Are the ordering cost and the holding cost for the order quantity obtained in Part A the same? Explain why or why not.
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