In the quantity discount model in Example 13.2, the minimum total annual cost is region 3 is clearly the best. Evidently, the larger unit purchase costs in the other two regions make these two regions unattractive. When would a switch take place? To answer this question, change the model slightly. First, change the fixed cost of ordering to $40. Second, keep the unit cost in region 3 at $26, but change the unit costs in regions 1 and 2 to $26+ 2k and $26+ k, where you can let k vary. (Currently, k is $2.) Use a two-way SolverTable, with k varied over some appropriate range to see how small k must be before it is optimal to order from region 1 or 2. What region is the optimal ordering quantity in if there is no price break at all (k = 0). How do you reconcile this with your SolverTable findings?
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here