Based on the information in the chart I calculated below, what is the Answer to A & B.
A) What order quantity will allow the wholesale distributor to minimize total annual inventory costs (Purchase Cost + Ordering Cost + Holding Cost) by taking advantage of the proposed discount pricing?
B) What is the total annual cost (Purchase Cost + Ordering Cost + Holding Cost) based upon taking advantage of the proposed discount pricing?
Quantity Discount Model
VariablesDiscount NumberDiscount Minimum QtyDiscount Maximum QtyDiscountDiscount CostEOQQPurchase CostOrdering CostHolding CostTotal CostAnnual demandD5,4751010000.00%$ 125.00661.8157661.82$ 684,375.00$827.27$ 827.27$ 686,029.54Purchase cost per unitC$125.0021001200010.00%$ 112.50697.6151001.00$ 615,937.50$546.95$ 1,126.13$ 617,610.58Holding or carrying cost per unit per yearCh$2.5032001None15.00%$ 106.25717.83992001.00$ 581,718.75$273.61$ 2,126.06$ 584,118.43Ordering cost per orderCo$100Holding or carrying cost as a percentage of unit costI2.00%
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