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Management Studies

You buy tow hitch balls in large lots for the tow tractors you manufacture. You estimate that it costs you approximately 20% of cost to store a ball for a year.

Ordering cost is estimated to be $49 per order and your annual demand is for 5000 balls.
Your supplier offers you the following price schedule:

QUANTITY DISCOUNT (%) DISCOUNT COST
0 to 999 0 $5.00
1000 to 1999 4 $4.80
2000 or more 5 $4.75

The discount cost is for all balls in the order.

You operate 5 days per week, 52 weeks per year, minus 7 paid holidays.

A. What price per ball should you pay to minimize total cost?

B. How many balls should you order at each time?

C. How many orders will you make per year?

D. What is your total cost for balls each year?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M9612884

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