As an Inventory Manager,you Must Decide on the Order Quantity

question 18

Multiple Choice

As an inventory manager,you must decide on the order quantity for an item.Its annual demand is 300 units.Ordering cost is $20 each time an order is placed,and the holding cost is 30 percent of the per-unit price.Your supplier provided the following price schedule.
$$\begin{array} { | c | c | } \hline \text { Price per Unit } & \text { Order Quantity } \\\hline \$ 6.00 & 000 - 149 \\\$ 5.00 & 150 - 199 \\\$ 4.00 & 200 \text { and more } \\\hline\end{array}$$
What ordering-quantity policy do you recommend?

• A) Fewer than or equal to 50 units
• B) Greater than 50 units but fewer than or equal to 149
• C) Greater than 149 units but fewer than or equal to 199 units
• D) More than 199 units

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Definitions:

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life, used in calculating depreciation.

Discarded

Discarded refers to items or substances that have been thrown away or disposed of, no longer deemed useful or necessary.

Equipment Cost

The total amount spent to acquire, install, and make ready for use a piece of equipment for operational purposes.

Capital Expenditure

Funds used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings.