Price break Model:
Steamy Speedboats has an annual demand of 1,500 speedboats. Its supplier offers
quantity discounts to promote larger order quantities. The cost to place an order is
$300, and the holding rate is 32 percent of the purchase cost. The purchase cost for
each speedboat is based on the price schedule given below. Compute the optimal order
quantity, annual purchase cost, annual holding cost, annual order cost and total annual
inventory cost.
Order Quantity Price per Unit:
1 ? 50 $18,500
51 ? 100 $18,000
101 ? 150 $17,400
151 and above $16,800
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