Question: As inventory manager, you must decide on the order quantity for an item that has an annual demand of 2,000 units. Placing an order costs

As inventory manager, you must decide on the order quantity for an item that has an annual demand of 2,000 units. Placing an order costs you $20 each time. Your annual holding cost, expressed as a percentage of average inventory value, is 20 percent. Your supplier has provided the following price schedule:

Minimum Order Quantity Price per Unit

1 .............$2.50

200 .............$2.40

300 ............$2.25

1,000 ..........$2.00

What ordering policy do you recommend?

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