Rocky Mountain Tire Center sells 15,000 ?go-cart tires per year. The ordering co

Question

Rocky Mountain Tire Center sells 15,000 ?go-cart tires per year. The ordering cost for each order is ?$40?, and the holding cost is 30?% of the purchase price of the tires per year. The purchase price is ?$25 per tire if fewer than 200 tires are? ordered, ?$19 per tire if 200 or? more, but fewer than 5,000?, tires are? ordered, and ?$13 per tire if 5,000 or more tires are ordered. ?a) How many tires should Rocky Mountain order each time it places an? order (answer is 5,000) ?b) What is the total cost of this? policy? Total annual cost of ordering optimal order size equals? $____ ?(round your response to the nearest whole? number).

Explanation / Answer

a)

Rocky should order 5000 tires each time it places an order. Because,

b)

Total Cost of ordering each time = 5000*$13+(0.3*$13)+$40 = $65044

Total annual cost of ordering optimal order size = $65043.9*3 = $195132

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