Question: Let's consider the inventory problem with quantity discounts. The parameters are as follows: Annual demand lambda = 25000, Order cost K = 100, I =

Let's consider the inventory problem with quantity discounts. The parameters are as follows:

Annual demand lambda = 25000,

Order cost K = 100,

I = 0.3.

For order quantities between 0 and 499, you pay c(Q) = 21.60 per unit

For order quantities between 500 and 999, you pay c(Q) = 20.95 per unit

For order quantities >= 1000, you pay c(Q) = 20.90 per unit.

What is your total cost per year if your order quantity is 380 per order?

My answer = 547810.15
The correct answer = (531524)

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