A manager has just received a revised price schedule from a vendor. What order quantity should the manager use in order to minimize total costs? Annual demand is 120 units, ordering cost is $10, and annual carrying cost is $1 per unit
Quantity Unit Price
1-59 $15
60-99 $14
100 or more $13
Answer: Optimal Q = 49. TC(49) = $1849; TC(60) = $1730; TC (100) = $1622, so order 100.
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