Question: In the quantity discount model in Example 12.2, the minimum total annual cost is obtained by ordering enough to achieve the smallest unit purchasing cost.

In the quantity discount model in Example 12.2, the minimum total annual cost is obtained by ordering enough to achieve the smallest unit purchasing cost.

Evidently, the larger unit purchasing costs for smaller order quantities make them unattractive. Could an order quantity below 400 ever be best? Could an order quantity between 500 and 800 ever be best? To answer these questions, assume that there is no price break at all. Specifically, assume that the unit purchase cost is always $26. What is the optimal order quantity with this assumption? How does this help answer the preceding questions?

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