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1 3 . Rapid Grower, the supplier of plant food for Greens in Problem 1 2 , has offered the following quantity discounts. If the

13. Rapid Grower, the supplier of plant food for Greens in Problem 12, has offered the following quantity discounts. If the nursery places orders of 60 bags or less, the cost per bag is $25. For orders of 60 to 100 bags, the cost per bag is $23. For orders over100 bags, the cost is $22 per bag. Greens estimates its holding cost to be 25 percent of the unit price. Determine the most cost-effective ordering policy for Greens.
EOQatpriceof$22/bag
=
2
(
1780
)
(
12
)
22
(
0.25
)
=
88
bags
(
infeasiblequantity
)
EOQatpriceof$23/bag
=
2
(
1780
)
(
12
)
23
(
0.25
)
=
86
bags
(
feasiblequantity
)
EOQatpriceof$25/bag
=
2
(
1780
)
(
12
)
25
(
0.25
)
=
83
bags
(
infeasiblequantity
)
Total cost at feasible EOQ amount=(86/2)(23\times 0.25)+(1780/86)(12)+(23)(1780)=$41,435.62
Total cost at Q=100: (100/2)(23\times 0.25)+(1780/100)(12)+(23)(1780)=$41,441.10
Optimal ordering policy is to order 86 bags at a time.
14. In an effort to reduce its inventory, Rapid Grower is offering Greens, a local nursery (Problems 12 and 13), two additional price breaks to consider. If the nursery orders a three-month supply, the cost per bag is $16. If Greens orders a six-month supply, the cost per bag is $14.50. Should Greens change its order quantity calculated in Problem 13?

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