An East Coast electric company buys motors from a supplier on the West Coast for use in
Question:
An East Coast electric company buys motors from a supplier on the West Coast for use in pumping equipment. Production needs 1,400 motors per year. Procurement costs, including clerical and expediting costs, are $75 per order. Inventory-carrying cost is 25 percent per year. The supplier has provided the following price schedule:
Given this noninclusive price schedule, what is the optimal purchase quantity (to the nearest 50 units), and what is the total annual cost?
Transcribed Image Text:
Unit Price Units per Order First 200 Next 200 Over 400 $795 750 725
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