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Inventory models: Quantity discount model for Zeigler's Lumber

Zeigler's Lumber Supply sells an average of 15,200 board feet of 2 by 4 lumber weekly. Ziegler's purchases its 2 by 4 lumber from Western Cascade Wood Products. Western Cascade offers its customers the following all units quantity discount schedule:

Order Quantity (in Board Feet) Cost per Board Foot
1 -24,999 $.26
25,000 -49,999 $.245
50,000 -99,999 $.23
100,000 -249,999 $.22
250,000 -999,999 $.21
1,000,000 or more $.19

The annual holding cost rate for the lumber is 16%, and the cost of placing an order for the lumber is estimated to be $250. Lead time is three weeks, and Zeigler's desires a safety stock of 8000 board feet.Determine the optimal inventory policy of 2 by 4 's for Zeigler 's Lumber Supply.

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This posting contains solution to a problem of inventory models: Quantity discount model

$2.19