What is the optimal order quantity and minimum annual cost

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Reference no: EM131356388

Bell Computers purchases integrated chips at $350 per chip. The holding cost is $35 per unit per year, the ordering cost is $120 per order, and sales are steady, at 400 per month. The company's supplier, Rich Blue Chip Manufacturing, Inc., decides to offer price concessions in order to attract larger orders. The price structure is shown below.

Rich Blue Chip's Price Structure

Quantity Purchased

Price/Unit

1-99 units

$350

100-199 units

$325

200 or more units

$300

a) What is the optimal order quantity and the minimum annual cost for Bell Computers to order, purchase, and hold these integrated chips?

b) Bell Computers wishes to use a 10% holding cost rather than the fixed $35 holding cost in (a). What is the optimal order quantity, and what is the optimal annual cost?

Reference no: EM131356388

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