Question 6 (30 points)

Binary Choice sells new desktop and laptop computers. Their supplier for charges

$60 per order, and holding cost is $150 per unit. They sell 50 computers per month.

The manufacturer has offered the following price schedule:

Order Quantity Price Per Unit

11

$520

12 to 64

$500

65 to 128

$495

>128

$485

a) What order quantity minimizes total annual inventory cost?

Note: You must show all steps to receive credit

b) The supplier has offered to be a drop shipper, i.e., they will ship directly to the

customer. In exchange, they will increase the unit price to $515 per computer, but

not charge the ordering costs and all inventory will be held at the supplier. From a purely financial standpoint, should he take them up on the offer?

Question 6 (30 points) Binary Choice sells new desktop and laptop computers. Their supplier for charges $60 per order, and holding cost is $150 per unit. They sell 50 computers per month The manufacturer has offered the following price schedule Order Quantity Price Per Unit 11 S520 9 12 to 64 $500 12 65 to 128 $495 128 $485 a) What order quantity minimizes total annual Inventory cost Note You must show all steps to receive credit by the supplier has offered to be a drop shippere they will this directly to the customer in exchange they will increase the unit price to 5515 per computer, but not change the ordering costs and all inventory will be held at the supplier From a and should us take them up on the offer