## Question

# With a fixed cost of $100 per order, Nathan decided it was vital to get his money's worth. His monthly demand for energy drinks

## With a fixed cost of $100 per order, Nathan decided it was vital to get his money's worth. His monthly demand for energy drinks was 10,000 bottles and holding cost was estimated at 20% of unit cost. The mail order company offered him a couple of possibilities - he could pay $4.00 per bottle for orders of up to 10,000 bottles. After that threshold, he would pay only $3.98 per bottle, and if he ordered 20,000 or more bottles in an order, he would pay only $3.96 per bottle. 1) What is the best order quantity for Nathan to use? 2) What is the best total cost that Nathan can incur?

## Step by Step Solution

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There are 3 Steps involved in it

### Step: 1

To determine the best order quantity for Nathan to use and the best total cost he can incur we will compare the cost implications of each discount tie...### Get Instant Access to Expert-Tailored Solutions

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### Step: 2

### Step: 3

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### Microeconomics

**Authors:** Douglas Bernheim, Michael Whinston

2nd edition

73375853, 978-0073375854

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