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2. (16 points) A restaurant uses roughly 500 kilograms of meat a month. Currently the restaurant purchases 500 kilograms per order and pays $10
2. (16 points) A restaurant uses roughly 500 kilograms of meat a month. Currently the restaurant purchases 500 kilograms per order and pays $10 per kilogram. The supplier had just announced the all-unit quantity discount: orders of 800 kilograms or more will be filled at a price of $8 per kilogram. The restaurant incurs a cost of $120 each time it submits an order and assigns an annual holding cost of 20 percent of the purchase price per kilogram. a) Determine the order size that minimizes the total cost. (3 pts) b) If the supplier offered the all-unit discount at 1,000 kg instead of 800 kg, what order size would minimize the total cost? (6 pts) c) The supplier offered the following all-unit discount: orders between 1,000 kg and 1,499kg will be filled at a price of $8 per kg, and orders of 1,500kg or more will be filled at a price of $6.5 per kg. What order size would minimize the total cost? (6 pts) d) Assume that fresh meat will spoil within a month, will the optimal order size increase or decrease? (1 pts) (Round to the closest integer)
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