What order quantity is optimal

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A company will begin stocking an industrial component. Expected annual demand is 9,000 units. The parts can be purchased in one of three price categories: Zero to 599 costs $25.00, 600 to 1,199 costs $24.75, and 1,200 and over costs $24.50. Ordering cost is $100.00 and annual holding cost is 20 percent of unit price per unit. What order quantity is optimal if the intent is to minimize total annual costs? Defend your answer and show the cost calculations.

Reference no: EM131662707

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