The United States exports a substantial amount of scrap iron and steel to Japan and other countries.

A mail-order house uses 18,000 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96.

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QUESTION:

A mail-order house uses 18,000 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96. The following price schedule applies. Determine

a. The optimal order quantity.

b. The number of orders per year.

Number of Boxes __________Price per Box

1,000 to 1,999 ……………………….$1.25

2,000 to 4,999 …………………….. $1.20

5,000 to 9,999 ………………………$1.15

10,000 or more ……………………..$1.10


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