Q. Allen´s Shoe Store carries a basic black dress shoe for a man which sells at an approximate constant rate of 500 pairs of shoes every three months. Allen´s present buying policy is to order 500 pairs each time an order is placed. It prices $30 to place an order also inventory holding prices have an annual rate of 20 percent. With the order quantity of 500, Allen´s obtains the shoes at the lowest possible unit price of $28 per pair. Other quantity discounts offered by the manufacturer are listed below:
Order Quantity Price Per Pair ($)
0-99 36
100-199 32
200-299 30
300 or more 28
Illustrate what is the minimum-price order quantity for the shoes? Illustrate what are the annual savings of your inventory policy over the policy presently used?