The annual demand, ordering cost, and the annual inventory carrying cost rate for a certain item are 600 units, Quantity  1 to 49  50 to 249  250 and up  Price  $5.00/unit  $4.50/unit  $ 4.10/unit  $20/order and 30% of item price, respectively.   (a) Assume the discounts applied to all the units in the order, what should the order quantity be in order to minimize the average annual cost? Also, show the minimal average annual cost.      (b) Assume the discounts applied to the units are incremental, what should the order quantity be in order to minimize the average annual cost? Also, show the minimal average annual cost.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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The annual demand, ordering cost, and the annual inventory carrying cost rate for a certain item are 600 units,

Quantity  1 to 49  50 to 249  250 and up 
Price  $5.00/unit  $4.50/unit  $ 4.10/unit 

$20/order and 30% of item price, respectively. 

 (a) Assume the discounts applied to all the units in the order, what should the order quantity be in order to minimize the average annual cost? Also, show the minimal average annual cost.   

  (b) Assume the discounts applied to the units are incremental, what should the order quantity be in order to minimize the average annual cost? Also, show the minimal average annual cost. 

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