An Introduction to Management Science 13th Edition by David Anderson,Dennis Sweeney ,Thomas Williams ,Jeffrey Camm, Kipp Martin

Exercise 24

Keith Shoe Stores carries a basic black men's dress shoe that sells at an approximate constant rate of 500 pairs of shoes every three months. Keith's current buying policy is to order 500 pairs each time an order is placed. It costs Keith $30 to place an order. The annual holding cost rate is 20%. With the order quantity of 500, Keith obtains the shoes at the lowest possible unit cost of $28 per pair. Other quantity discounts offered by the manufacturer are as follows. What is the minimum cost order quantity for the shoes? What are the annual savings of your inventory policy over the policy currently being used by Keith?