In the quantity discount model in Example 12.2, suppose you want to see how the optimal order quantity and the total annual cost vary as the fixed cost of ordering varies. Use Solver Table to perform...

In the quantity discount model in Example 12.2, suppose you want to see how the optimal order quantity and the total annual cost vary as the fixed cost of ordering varies. Use Solver Table to perform this analysis, allowing the fixed cost of ordering to vary from $25 to $200 in increments of $25. Indicate the optimal ordering policy for each fixed cost of ordering.

EXAMPLE 12.2 ORDERING THUMB DRIVES WITH QUANTITY DISCOUNTS AT AJ TAYLOR

The accounting firm of AJ Taylor buys USB thumb drives from a distributor of PC supplies. The firm uses approximately 5000 drives per year at a fairly constant rate. The distributor offers the following quantity discount. If fewer than 500 drives are ordered, the cost per drive is $30. If at least 500 but fewer than 800 drives are ordered, the cost per drive is $28. If at least 800 drives are ordered, the cost per drive is $26. The fixed cost of placing an order is $100. The company’s cost of capital is 10% per year, and there is no storage cost. The firm wants to find the optimal order quantity and the corresponding total annual cost.

Objective To find the order quantity that minimizes the total annual cost of ordering in the face of quantity discounts.