Explore BrainMass

Lott Manufacturing: Quantity Discounts

Lott Manufacturing Inc. has been ordering parts for its production process in lots of 10,000 units. Each order costs the firm $50 to place, and holding costs per unit average $3. Lott uses 200,000 units every 250 days.

Lott Manufacturing was recently approached by its supplier with a new quantity discount program. The supplier offered the following quantity discounts.

Quantity Cost per unit
0-1,999 $5.00
2,000-3,999 4.99
4,000-5,999 4.98
6,000-7,999 4.97
8,000-9,999 4.96
10,000+ 4.95

What order quantity is optimal for Lott to place considering the quantity discounts?

Solution Preview


The discount is irrelevant in the computation of the economic order ...

Solution Summary

The solution examines Lott Manufacturing quantity discounts.