A mail-order company operates 48 weeks a year and uses 200 boxes a week. The company incurs a fixed order placement, transportation, and receiving cost of $95 each time an order is placed with the manufacturer. The holding cost is 5 percent of the cost. The manufacturer uses the following all-unit discount pricing schedule.

Order Quantity. Cost per Box

100 - 199 $100

200 - 499 $75

500 or more $50

1. Evaluate the number of boxes that the company should order in each lot in order to minimize the total cost of inventory.
2. What is the total inventory cost, including the ordering, purchasing, and holding costs?
3. Are the ordering cost and the holding cost for the order quantity obtained in Part A the same? Explain why or why not.

Answer rating: 100% (QA)

D Demand per year number of boxes per week weeks per year S Ordering cost per order H Hold... View the full answer