Introduction to Supply Chain Management

For all the problems, to receive full scores, you have to show your complete and accurate work. If you only provide the final answers without showing your computations, you will not be assigned a full score (or you will miss the opportunity of receiving partial credit).

Problem : Quantity Discounts

The U.S. Cellular store plans to order the “iPhone 8” from Apple. The demand for this newest iPhone is expected to be 800 per year. There is an $350 charge for placing an order and the store estimates a $350 cost per unit to hold it in inventory for the year.

What is the economic order quantity?

For part b) assume prices for the new iPhone are based on the quantity purchased at one time, so if less than 150 are ordered, the unit price is $600; if 150 to 299 are ordered, the unit price is $587; if 300 or more are ordered, the unit price is $571.

What order quantity will result in the lowest total annual cost for the U.S. Cellular store? For full credit you must show your work and write the quantity that should be purchased each time.