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Office Express sells office suppliers to businesses on a membership basis---i.e., walk-in customers without a membership are not allowed. The company delivers supplies directly to the purchaser as a long as a minimum purchase of $100 is made. In order to encourage bulk orders, Office Express offers the following discount schedule on purchase quantities of boxes of paper. Larry’s Lumber has annual demand of 5,000 boxes of paper, a setup cost of $10 per order, and a holding cost of 22 percent of the purchase price. Calculate the optimal order quantity.
1-100 boxes $5 per box
100-249 boxes $4.75 per box
250-499 boxes $4.50 per box
500 or more boxes $4.25 per box
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