Acme Company has sells a product that has an annual demand of 180 units. Ordering cost is $20.00 per order, and annual inventory cost is 25%. The product can be purchased from a supplier to using the following price-quantity discount table:
Order size
Discount
Unit Cost (net of discount)
0 to 49
0%
$30.00
50 to 99
5%
$28.50
100 or more
10%
$27.00
1. Assume that the current inventory policy of the company is to order once per month. What is the total inventory cost (holding + ordering + purchase) at this current practice?
What recommendation would you give to Acme regarding its current ordering policy - keep ordering at the same level, or change the order size? Provide support to your answer. Be as clear and as specific in your analysis.
How do I calculate the holding costs on this problem?