Introduction to Management Science 12th Edition by Bernard Taylor

Exercise 20

Determine the optimal order quantity and total annual inventory cost for cups in Problem if the carrying cost is 5% of the price of a box of cups.
Problem
The 23,000-seat City Coliseum houses the local professional ice hockey, basketball, indoor soccer, and arena football teams, as well as various trade shows, wrestling and boxing matches, tractor pulls, and circuses. Coliseum vending annually sells large quantities of soft drinks and beer in plastic cups, with the name of the coliseum and the various team logos on them. The local container cup manufacturer that supplies the cups in boxes of 100 has offered coliseum management the following discount price schedule for cups:
The annual demand for cups is 2.3 million, the annual carrying cost per box of cups is $1.90, and the ordering cost is $320. Determine the optimal order quantity and total annual inventory cost.