Problem:
As inventory manager, you must decide on the order quantity for an item that has an annual demand of 2,000 units. Placing an order costs you $20 each time. Your annual holding cost, expressed as a percentage of average inventory value, is 20%. Your supplier has provided the following price schedule:
minimum order quantity price per unit
1 $2.50
200 $2.40
300 $2.25
1,000 $ 2.00
What ordering policy do you recommend?