With a fixed cost of $100 per order, Nathan decided it was vital to get his money's worth. His monthly demand for energy drinks was 10,000 bottles and holding cost was estimated at 20% of unit cost. The mail order company offered him a couple of possibilities -
The marginal unit discount pricing schedule is:
|
Order Quantity
|
Marginal Unit Price
|
|
0-10,000
|
C0 = 4.00
|
|
10,000-20,000
|
C1 = 3.98
|
|
Over 20,000
|
C2 = 3.96
|
1) What is the best order quantity for Nathan to use? Answer:
2) What is the best total cost that Nathan can incur? Answer: