The Annual Demand for an Item Is 10,000 Units

question 42

Essay

The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. What is the optimal order quantity, given the following price breaks for purchasing the item? What price should the firm pay per unit? What is the total annual cost at the optimal behaviour?
$$\begin{array} { | l | l | } \hline \text { Quantity } & \text { Price } \\\hline 1 - 9 & \$ 2.95 \text { per unit } \\\hline 10 - 999 & \$ 2.50 \text { per unit } \\\hline 1,000 - 4,999 & \$ 2.30 \text { per unit } \\\hline 5,000 \text { or more } & \$ 1.85 \text { per unit } \\\hline\end{array}$$

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Definitions:

Global Air Circulation

The large-scale movement of air that distributes heat and moisture across the earth, influencing weather and climate patterns.

Land

The part of the earth's surface that is not covered by water, including areas used for agriculture and urban development.

Evergreen Coniferous

Trees that maintain their leaves throughout the year and bear cones, typical of the pine, cedar, and spruce families.

Boreal Forests

Vast biomes of dense evergreen forests located in the northern regions of the world, known for long winters and short, wet summers.