FlipCo carries a basic black dress shoe that sells at an approximate constant rate of 320 pairs of shoes every four months. It costs FlipCo $36 to place an order. The annual holding cost rate is 15%. FlipCo’s current buying policy is to order 90 pairs each time an order is placed at a unit cost of $24 per pair. Other quantity discounts offered by the manufacturer is as follows:
Order Quantity /Price Per Pair
0 - 75 $30
76 - 150 $24
151 - 225 $18
226 or more $12
a) What is the recommended order quantity and total cost associated with the recommended order quantity?
b) What are the annual savings of your inventory policy over the policy currently being used by FlipCo?