Quantity Discount and Inventory Management Worksheet

Why do suppliers typically offer quantity discounts?

Which of the following is not part of total inventory cost in the Quantity Discount model?

If a buyer orders 50 units, what is the purchase cost?

In the Quantity Discount model, why must we sometimes check a higher price range even if a lower price exists?

A retail shop faces an annual demand of 2,400 units. The ordering cost is $$50 per order, and the annual holding cost is$$ 5 per unit. The shop is considering how often to order stock if no discounts are offered. What is the Economic Order Quantity (EOQ)?

A supplier offers the following price schedule for an electronic component: • 1–99 units: $$50 per unit • 100–199 units:$$ 48 per unit • 200+ units: $45 per unit The buyer calculates an EOQ of 90 units (based on demand, ordering, and holding costs). Which price range is feasible for the EOQ of 90?

A company requires 12,000 units annually. The ordering cost is $$100 per order, and the annual holding cost is 20$$ 10 per unit • 500–999 units: $$9.50 per unit • 1,000+ units:$$ 9 per unit. At the $9.50 price level, what is the annual holding cost per unit?

A company faces an annual demand of 6,000 units. The ordering cost is $$40 per order, and the holding cost is$$ 2 per unit per year. What is the EOQ under these conditions?

A company faces an annual demand of 6,000 units. The ordering cost is $$40 per order, and the holding cost is$$ 2 per unit per year. The supplier offers the following discount schedule: • 1–299 units: $$10 per unit • 300+ units:$$ 9.80 per unit. The company must decide whether to order at the EOQ or take advantage of the discount. Which option yields the lowest total annual cost?

A wholesaler requires 24,000 units per year. Ordering cost is $$120 per order, and the annual holding cost is 25$$ 20 per unit • 1,000–1,999 units: $$19 per unit • 2,000+ units:$$ 18 per unit The wholesaler calculates the EOQ at the $19 price level as 1,200 units. Is this EOQ feasible, and what should the company do next?