EcoFresca (EF) has recently introduced a quantity-discount pricing strategy for the purchase of bottled water units from AquaPurify. For orders up to 15,000 units, AquaPurify charges $1.5 per unit and $60 for a delivery fee. For orders of 15,001 to 25,000 units, AquaPurify charges $1.25 per unit and $65 for a delivery fee. For orders of at least 25,001 units, AquaPurify charges $1 per unit and $75 for a delivery fee. With this new pricing policy, how should EF modify its ordering policy for bottled water units? For easier calculation, suppose the demand is now 1,200 units per week for 50 weeks in a year, and the opportunity cost of capital and all other inventory costs is 4% annually.

a. How many units should EF order at a time?

b. What is the total annual cost under the new plan?

Answer rating: 100% (QA)

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