IM.81 An appliance distributor in Arizona has high-volume sales for an ice clean
ID: 422277 • Letter: I
Question
IM.81 An appliance distributor in Arizona has high-volume sales for an ice cleaner solution. The manufacturer of this cleaner offers quantity discounts per the following discount schedule
Quantity
Unit Price
1 - 399
$15.00
400 - 1,199
$14.50
1,200+
$14.00
The appliance distributor pays $60 each time it places an order with the manufacturer. Holding costs are $4.50 per unit. Annual demand is expected to be 3,600 units.
1. Based on this information, which quantity discount option should you select? (In the answer field below, write the number the corresponds to your answer. Do not put a period after the number.)
1. Quantity Discount 1 - 399
2. Quantity Discount 400 - 1,199
3. Quantity Discount 1,200+
2. What is the annual holding cost for this option? (Display your answer to the nearest whole number).
3. What is the total annual inventory cost for this option? (Display your answer to the nearest whole number).
4. What is the total annual inventory cost for this option? (Display your answer to the nearest whole number).
5. What is the total annual inventory cost for this option? (Display your answer to the nearest whole number).
6. What is the annual material cost for this option? (Display your answer to the nearest whole number).
7. What is the total annual inventory cost for this option? (Display your answer to the nearest whole number).
Quantity
Unit Price
1 - 399
$15.00
400 - 1,199
$14.50
1,200+
$14.00
Explanation / Answer
$5,400
*( as per guidelines can answer upto 4 parts questions only)
Ans 1 Quantity Unit price Quantity discount Number of orders Cost per order Holding cost Total costs In $ In $ In $ Option 1 1-399 15 9 541.3533835 54541.35 1800 56341.353 Option 2 400-1199 14.5 3 180.1501251 52380.15 5395.5 57775.65 Option 3 1200+ 14 3 180 50580 5400 55980 Holding cost 4.5 Ordering cost 60 Annual demand (In units) 3600 Ans 1 Best option is Order 1200+ which will cost $ 55980 (including holding the cost of $5400) Ans 2 Holding cost$5,400