solution

A retailer would like to determine the optimum order quantity based on the annual demand of the product, holding cost, and setup cost (ordering cost). The annual demand for the product is 2000 units. The holding cost of the product per year is $1 per item. The setup cost per order is $50 per order. The retailer operates 250 days in a yea

1. Optimum order quantity = 447.21
2. Number of orders = 4.47
3. Time between two orders = 55.9 days
4. Total holding = 223.60, Total ordering = 223.50; Together = 447.1
5. Reorder Points = 56

Question: If the retailer of the previous question can get discounts based on based on the quantity, purchased according to the table below, then what would be the optimum order quantity?

Quantity Discount Price

0 to 999 $5.00

1000 to 1999 $4.75

2000 and more $4.50