Question

Jack's Stationery store also carries a Colour Cartridge for Laser Printers that sells at an approximate constant rate of 500 units every three months. His current buying policy is to order 500 units each time he orders from a supplier. It costs Jack $120 to place an order. The annual holding cost rate is 20%. With the order quantity of 500 , Jack obtains the Colour Cartridges at the lowest possible unit cost of $112. Other quantity discounts offered by the supplier are as follows:

Order quantity price per unit
1-99 $144
100-199 $128
200-299 $120
300-or more $112
(i) What is the minimum cost order quantity for the Colour Cartridges?

Answer 1

The minimum cost order quantity for Colour Cartridges at Jack's stationery store is 500 units, as it qualifies for the lowest possible unit cost of $112 and does not affect the holding or ordering costs provided in the scenario.

Step-by-step explanation:

The question seeks to determine the minimum cost order quantity for Colour Cartridges in Jack's stationery store. Jack sells about 500 units every three months and currently orders 500 units with each order at a unit cost of $112. Considering the annual holding cost rate of 20% and an order placement cost of $120, the goal is to find the order quantity that minimizes total costs, including ordering and holding costs. The quantity discounts information provided does not change the optimum order quantity since Jack already obtains the lowest price at the current order level of 500 units.