Problem: ABC Company is a manufacturer of electronic components. They order resistors from a supplier in bulk at a discounted price per unit. The following table shows the quantity discounts offered by the supplier: Order Quantity (Units) Price per Unit 1-99 $10 100-499 $9.50 500-999 $9.00 1,000+ $8.50 drive_spreadsheetExport to Sheets ABC Company estimates their annual demand for resistors to be 12,000 units. The carrying cost for holding inventory is 20% per year of the unit cost. The ordering cost is $50 per order. Objective: Determine the optimal order quantity that minimizes the total cost of inventory management for ABC Company.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
icon
Related questions
icon
Concept explainers
Topic Video
Question

Problem:

ABC Company is a manufacturer of electronic components. They order resistors from a supplier in bulk at a discounted price per unit. The following table shows the quantity discounts offered by the supplier:

Order Quantity (Units) Price per Unit
1-99 $10
100-499 $9.50
500-999 $9.00
1,000+ $8.50
drive_spreadsheetExport to Sheets

ABC Company estimates their annual demand for resistors to be 12,000 units. The carrying cost for holding inventory is 20% per year of the unit cost. The ordering cost is $50 per order.

Objective:

Determine the optimal order quantity that minimizes the total cost of inventory management for ABC Company.

Expert Solution
steps

Step by step

Solved in 9 steps with 3 images

Blurred answer
Knowledge Booster
Inventory management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Practical Management Science
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Business in Action
Business in Action
Operations Management
ISBN:
9780135198100
Author:
BOVEE
Publisher:
PEARSON CO
Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.