Purpose cleanser be in response to new price schedule

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Lou O’Brien manages the janitorial supplies for the Merton-Flemmer office building in downtown Chicago. The six-person janitorial staff at the building uses approximately 40 five-gallon containers of all-purpose cleanser per month. Each container costs the building $94. The current supplier of the building’s all-purpose cleanser has just informed Lou that it has changed its pricing structure. The supplier will be raising the price of the cleanser to $99 per container but will offer a discounted price of $93 each for any orders of 60 containers or more. It costs Lou $65 to place an order with the supplier, which includes the cost of shipping any quantity of the cleanser containers to the building. The supply closet for the building is relatively small; as a result, Lou is comfortable using a holding cost rate of 42% when managing the inventory of any janitorial supplies. What should Lou’s new order quantity for all-purpose cleanser be in response to this new price schedule? Justify your recommendation. What is the total annual cost of using this order quantity for the cleanser?

Reference no: EM132241651

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