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Warren recently receive a letter from TLC that showed the unit price of the stereo system would be $130 because of the inflation and
Warren recently receive a letter from TLC that showed the unit price of the stereo system would be $130 because of the inflation and the shortage of semiconductors. Warren decided to negotiate with TLC. Eventually, the sales rep of TLC has made the following offer to Warren: If Warren orders more than 250 units at a time, the cost per unit is $115.00. If the order is between 150 and 249 units at a time, the cost per unit is $130.00. However If the order is from 1 to 149 units at a time, the cost per unit is $150.00. Warren revised his assumptions and estimates monthly demand will be declined to be 225 units of stereo systems. Holding cost will increase to 15 percent of unit price. The cost to place an order will be higher to be $120.00. The information is summarized as below: (This is from 'Inventory' tab of the final exam worksheet.) Quantity purchased 1-149 units 150 249 units 250 or more units Monthly demand Unit price $150 $130 $115 225 units Ordering cost Holding cost $120 per order 15% per unit cost Warren is interested in the most cost-effective ordering policy. What is the optimal (most cost-effective) order quantity if Warren uses
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