A lab is trying to determine how many test kits it should order from its supplier. They use 780 kits per year (D). The annual holding cost is $3 per kit per year (H). The ordering cost is $15 per order (S). The supplier delivers their orders all at one time but offers a quantity discount. Draw the Order quantity (Q) verses Total Annual Cost graph with 3 item prices (as shown in Figure 12.7 of the textbook). What is the optimum condition (order quantity and item price)? What is the total annual cost (holding cost + ordering cost + item cost)?

Quantity / $Price

1-59 / 25

60-99 / 23

100 and more / 22