Example 1. Surge Electric uses 4000 toggle switches a year. Switches are priced as follows. 1 to 499, $O.90 each. 500 to 999, $0.85 each. and 1000 or more, $0.80 each. It costs approximately $30 to prepare an order and receive it, and the carrying costs are 40% of the purchase price per unit on an annual basis. Determine the optimal order quantity and the total annual cost. Solution antity Prige ner umit
Example 1. Surge Electric uses 4000 toggle switches a year. Switches are priced as follows. 1 to 499, $O.90 each. 500 to 999, $0.85 each. and 1000 or more, $0.80 each. It costs approximately $30 to prepare an order and receive it, and the carrying costs are 40% of the purchase price per unit on an annual basis. Determine the optimal order quantity and the total annual cost. Solution antity Prige ner umit
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
give another example for quantity discount model like the example in the photo
Transcribed Image Text:Quantity Discount Model
Example 1.
Surge Electric uses 4000 toggle switches a year. Switches are priced as follows. 1 to 499, $0.90 each.
500 to 999, $0.85 each. and 1000 or more, $0.80 each. It costs approximately $30 to prepare an order
and receive it, and the carrying costs are 40% of the purchase price per unit on an annual basis.
Determine the optimal order quantity and the total annual cost.
Solution.
Quantity
Price per unit
If D- 4000 , H- 40% of purchase price, S- $30
1-499
$0.90
2DS
EOQ90.83-
2(4000)(30)
0.40x0.85
- 840 units
500-999
$0.85
H
T.C s4O @S085-을 H + s+ PD-0.40x0.85 +
4000
30 + 0.85 x 4000 - $3,686
1000 or more
$0.80
840
500
0.40x0.85+
The optimal order quantity
4000
T.C
PD -
30 + 0.85 x 4000 - $3,725
500
500 @$0.85
-1000 units
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