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The annual demand for a certain product sold in a department store is 1,000 units. Ordering cost per order is $50, holding rate is 40%, and unit cost is $200. The department store currently is ordering every two months, but now is offered the following quantity discount scheme: For an order of up to 'L-1' units no discount. For an order from L units up to 299 units-a discount of 25%, and for a larger order - a discount of 30%.
Question 1: As mentioned, the discount break points are 1, 'L', and 300. The total cost for Level 1 (that starts at L and ends at 299) is 153500 dollars. Find 'L'. Use the template and Data Table to find L (this is a one dimensional Data Table). Start at L=25 with increments of 5. You can also use Goal Seek instead of Data Table.
Question 2: Assume the discount break points are 1, 150, and 600. The seller tries to convince the buyer to purchase the largest amount. At which break-point (instead of 600) the buyer might purchase at?
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