Let's see how this procedure can be applied by showing an example. Brass Department Store.
stocks toy race cars. Recently, the store was given a quantity discount schedule for the cars; this
quantity discount schedule is shown in table 6.3. Thus, the normar cost for the toy race cars is $5.
For orders between 1,000 and 1,999 units, the unit cost is $4.80, and for orders of 2,000 or more
units, the unit cost is $4.75. Furthermore, the ordering cost is $49 per order, the annual demand
is 5,000 race cars, and the inventory carrying charge as a percentage of cost, I, is 20% or 0.2.
What order quantity will minimize the total inventory cost?