[GailKT]

Landers CD Company has recently contracted with a new case supplier that offers a quantity discount program. The company needs to order 100,000 cases a year. Fixed costs per order are $20.00. Holding costs are $.15 (cents) per item. The discount program schedule is as follows:



0-4,999
$0.50

5,000-9,999
$0.35

10,000-19,999
$0.25

20,000
$0.10




a. What is the total cost of the inventory policy if the company chooses to order 5,000 units at a time, and what is the cost if it chooses to order 20,000 units at a time, ignoring the cost of capital?

[MaggieMouse]

5,000 units at a time-$20x(100,000/5,000)+($.15+$.35)x100,000, this formular ignores the difference in length of holding the item. Just plug different number to the 5,000 spot for rest of the questions, and change the $.35 spot according to the schedule.