3. A large producer of household products purchases a glyceride used in one of its deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40 pounds per month, and the company uses a 23 percent annual interest rate to compute holding costs. The chemical can be purchased from a supplier who offers the following all-units discount schedule: Order Size Price per pound 0≤Q<500 500≤Q<1,000 $1.30 $1.20 1,000≤Q $1.10 1 Assume that the cost of order processing is $150. What is the optimal order quantity and the corresponding annual total cost? (show your calculations)

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
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3. A large producer of household products purchases a glyceride used in one of its deodorant
soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40
pounds per month, and the company uses a 23 percent annual interest rate to compute
holding costs. The chemical can be purchased from a supplier who offers the following
all-units discount schedule:
Order Size
Price per pound
0≤Q<500
500≤Q<1,000
$1.30
$1.20
1,000≤Q
$1.10
1
Assume that the cost of order processing is $150. What is the optimal order quantity and
the corresponding annual total cost?
(show your calculations)
Transcribed Image Text:3. A large producer of household products purchases a glyceride used in one of its deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40 pounds per month, and the company uses a 23 percent annual interest rate to compute holding costs. The chemical can be purchased from a supplier who offers the following all-units discount schedule: Order Size Price per pound 0≤Q<500 500≤Q<1,000 $1.30 $1.20 1,000≤Q $1.10 1 Assume that the cost of order processing is $150. What is the optimal order quantity and the corresponding annual total cost? (show your calculations)
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