A manufacturer of exercise equipment purchases the pulley section of the equipment from a supplier who lists these prices: less than 1,000, $5 each; 1,000 to 3,999, $4.95 each; 4,000 to 5,999, $4.90 each; and 6,000 or more, $4.85 each. Ordering costs are $50, annual carrying costs per unit are 40 percent of purchase cost, and annual usage is 4,900 pulleys. Determine an order quantity that will minimize total cost.

Respuesta :

Answer:

The order quantity that will minimize total cost = [tex]\sqrt{2DCO/CC[/tex]

                                                                              = [tex]\sqrt{(2 x 4900 x $50)/(0.4 x 4.90)[/tex]

                                                                               =  [tex]\sqrt{$490,000/1.96}[/tex]

                                                                               = 500 units

Explanation:

Demand =  4900

ordering cost ( Co) = $50

Carrying cost =  40% x $4.90  =  $1.96