Question

County Hospital orders syringes from a hospital supply firm. The hospital expects to use 40,000 syringes per year. The ordering cost (cost to order and have the syringes delivered) is $800 per order. The annual holding cost per syringe is 20% of the cost of a syringe. The hospital supply firm offers the following quantity discount pricing schedule. Order Quantity Price per Syringe 0 – 5,999 $3.46 6,000 - 17,999 $3.41 18,000 – 23,999 $3.39 24,000 and over $3.36 a) What is the optimal quantity per order based on the total annual cost (composed of the holding cost and ordering cost and the acquisition cost)? Provide the lowest total cost for each of the price options, include the holding, ordering and acquisition cost.

Answer 1

Solution :

Optimal Order Quantity : 9617 and total annual cost : 143,006.66