A supplier for an electronics store has introduced quantity discounts to encourage larger order quantities of cameras. The price schedule is:
Quantity purchased Price per unit
fewer than 525 $80
at least 525 $75
Suppose the monthly demand at a retail store that buys from this retailer and resells is 175 units. The supplier charges a fixed cost of $180 per shipment. The cameras are expected to sell well for multiple seasons, so multiple replenishment opportunities are possible.
If the retailer estimates its annual holding costs to be 3.5%, what is the optimum order quantity of a continuous review policy?
(Note: Choose the closest answer.)
519.62
525
175
536.66
Expert Answer