BabyGear is a retailer of high quality baby products in the European market. Their best selling product is E-Chupetin65, a pacifier enabled with sensors and AI technology that sends a warning to your phone before your baby starts crying.

The demand for E-Chupetin65 is very stable at 9200 units per month with virtually no variability. BabyGear pays $20 for each pacifier, and sells each unit for $35. The annual holding rate for these pacifiers is 20%, and the administrative cost associated with placing an order is $350. The company is currently ordering exactly the monthly demand, 9200 units of E-Chupetin65, the first day of each month.

Assume no lead time. Assume 52 weeks per year.

The supplier for E-Chupetin65 is working on a new line of pacifiers and is offering the E-Chupetin65 at a discount rate of $18 only during the current month.

Question:

Should the company order at the discount rate? If so, how many units should they order?

Answer rating: 100% (QA)

Okay lets calculate the total costs for ordering at the regular price and the discounted price to de... View the full answer