a. How many tires should Rocky Mountains tire order each time it time it places

Question

a. How many tires should Rocky Mountains tire order each time it time it places an order?

b. What is the total cost of this policy?

Rocky Mountain Tire Center sells 7,000 go-cart tires per year. The ordering cost for each order is $35, and the holding cost is 40% of the purchase price of the tires per year. The purchase price is $20 per tire if fewer than 200 tires are ordered, $17 per tire if 200 or more, but fewer than 5,000, tires are ordered, and $14 per tire if 5,000 or more tires are ordered a) How many tires should Rocky Mountain order each time it places an order? Rocky Mountain's optimal order quantity isnyour response as a whole number).

Explanation / Answer

if we order more then 5000 units the unit cost is $14 so that all the units to be orederd in a single oreder

so that the total value will be 14*5000 = $70000

Here the ordering costes are $35

and the holding charges were 40 % $70000 = $28000

therfore the total value will be $98035

for all other combinations the cost of purchase will be more

a) 7000 tires to be ordered each time when they place a order

b) the optimal order quantity is more than 5000 units each order

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