Theodora Ltd. Has the following quantity discount policy with its supplier Evanora Inc. Quantity..........................Price per Case 1299

Question:

Theodora Ltd. Has the following quantity discount policy with its supplier Evanora Inc.

Quantity..........................Price per Case

1–299 cases..........................$25.00

300–749 cases......................$23.75

750–1,499 cases...................$22.56

1,500 +cases.........................$21.43

The economic order quantity is 150 cases and the annual usage is 33,750 cases. The ordering cost (K) is $5 per order and the carrying cost of inventory (H) is $15 per unit. Determine the most cost-effective order quantity.

Economic Order Quantity
Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...