K K L A B D E F G H J 1 Quantity Discount (Price Breaks) 2 A company uses 1000 computer chips anually in the production process. 3 The ordering cost for these is $75 per order, and the holding cost is assumed to be 40% of the per-unit cost. 4 In orders of less than 200 chips the cost $18 per unit, for orders of 200 or more, the cost drops to $15 per unit. 5 6 Should the company take advantage of the quantity discount? 7 8 D 9 S TC = Es+#+DC S .4*Cq 10 H 11 12 Set to 13 Co 14 Q 15 Ordering 16 Holding 17 Purchasing tal 19 20 What changes with regards to holding and ordering costs when the quantity discount is taken? 21 22 23 24 25 26 27 Ordering Policy The FOQ Model Quantity Discount +