Each year, a firm purchases 1000 cases of SKU wxy. The cost to place an order is $130, the lead time is 12 days (there are 365 operating days in a year), and the annual inventory carrying charge is 25%. The supplier has the following price schedule:
Quantity
Price per case
less than 50
$700
50 or more
$650
If an all units quantity discount is in effect, what should the order quantity and associated total costs be? What is the average price paid per case at this order quantity?
Sample Solution
