Optimal order quantity and the minimum annual cost

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Bell computers purchases integrated chips at 350 per chip. The holding cost is $34 per unit per year. The ordering cost is $118 per order; sales are steady at 395 per month. The company supplier, rich blue chip manufacturing inc, decides to offer price concession in order to attract large orders. The price structure is shown below. Quantity purchased 1-99 units price per unit $350, quantity purchased 100-199 unit price per unit $325, and quantity 200 or more units price per unit $300.

a) What is the optimal order quantity and the minimum annual cost for Bell computers to order, purchase and hold these integrated chips? The optimal order quantity after the change in price structure is _________ units? The total annual cost for Bell computers to order, purchase and hold the integrated chips is $____________?

b) Bell computers wishes to use a 10% holding cost rather than the fixed $34 holding cost in part a. What is the optimal order quantity, and what is the optimal annual cost?

Reference no: EM13778894

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