Mac-in-the-Box sells computer equipment by mail and telephone order. Mac sells 2,400 flat-bed scanners per year. Ordering cost is $300 and annual holding cost is 25 percent of the item's price. There are 300 working days in the year and the lead time is 3 days. The scanner manufacturer offers the following price structure to Mac-in-the Box
Order Quantity Price per Unit
1 to 199 $520.00
200 to 499 $515.00
500 or more $512.00
• Given the above information and basing your decision on the economics, what order quantity do you recommend that Mac order from the scanner manufacturer? Why?
• How much more expensive is the next lowest cost option?
• For the optimal order quantity, what is the inventory position immediately after an order is placed?