A firm's demand for a product is continuous and fixed at a rate of 2 units a day. The administration costs of placing an order with the firm's supplier is $16 and the firm estimates that its inventory holding cost is 16 cents per unit per day. If the product costs $5, what is the economic order quantity and the economic order time?
this is what I get:
x(demand) = 2
h (holding cost) = $0.16
k(fixed cost)= $16
c (variable cost) = $5
the economic order quantity (Q) is (2kx/h) square rooted.
the economic order time is Q/x
Q=20
T=10
I'm struggling the following question though:
the firm is offered a reduction for bulk purchases. if it order 30 or more units it can obtain a 10% discount and if it orders at least 50 units it can obtain a 20% discount. should the firm change its inventory policy?
any help appreciated