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An assembly plant purchases 35,000 air filters per year. Fixed ordering cost is $100. The company uses an inventory holding cost rate of $0.40/filter/year. The
An assembly plant purchases 35,000 air filters per year. Fixed ordering cost is $100. The company uses an inventory holding cost rate of $0.40/filter/year. The vendor has offered the following price schedule: For orders of 5,000 or more, the unit cost is $2.50. For orders of 1,000 to 4,999, the unit cost is $2.65. Orders for fewer than 1,000 have a unit cost of $2.85. Find the optimal order quantity.
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