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Question
The annual demand for an item is 40,000 units. The cost to process an order is $40 and the annual inventory holding cost is $3 per item per year. What is the optimal order quantity, given the following price breaks for purchasing the item?
| Quantity | Price |
| 1-1,499 | $2.50 per unit |
| 1,500 - 4,999 | $2.30 per unit |
| 5,000 or more | $2.25 per unit |
a. What is the optimal behavior?
b. Does the firm take advantage of the lowest price available? Explain.
Answer
This answer is hidden. It contains 435 characters.
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