(Marginal Unit Quantity Discount)

With a fixed cost of $100 per order, Nathan decided it was vital to get his money's worth. His monthly demand for energy drinks was 10,000 bottles and holding cost was estimated at 20% of unit cost. The mail order company offered him a couple of possibilities

Microsoft Word - takehomeFinal_Problem.doc

The marginal unit discount pricing schedule is

Order Quantity	Marginal Unit Price
0-10,000	C0 = 4.00
10,000-20,000	C1 = 3.98
Over 20,000	C2 = 3.96

5) What is the best order quantity for Nathan to use

6) What is the best total cost that Nathan can incur

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(All Unit Quantity Discount)

North Dakota Hospital (NDH) orders its own supplies and manages the inventory. A common item used is a sterile Intravenous (IV) Starter Kit. Weekly demand for the IV Starter Kit is 520 units. The unit cost of an IV Starter Kit is $2. North Dakota has estimated that the physical holding cost (operating and storage costs) of one unit of medical supply is about 30 percent per year. Each hospital incurs a fixed order cost of $120 whenever it places an order, regardless of the order size. The supplier takes one week to deliver the order. Currently, NDH places an order of 6,400 units of the IV Starter Kit whenever it orders.

The manufacturer of IV Starter Kits uses the following all unit discount pricing schedule:

Order Quantity	Unit Price
0-2,999	C0 = 2.00
3,000-5,999	C1 = 1.97
6,000 or more	C2 = 1.94

7) What is the optimal order quantity?

8) What is the total cost at the optimal order quantity?