Bell Computers

Qty Holding Cost

Purchased Unit/ Price @ 10%
1 ------ 99 350 35
100 ------ 199 325 32.5
200 above 300 30

S 120 120
D 400 * 12 4,800

a
i Optimal Order Quantity
√(2𝐷𝑆/𝐻)

√((2 (4,800) 120)/35)

Q1 = 181.42
Q D
Tc = C = 2 (H) + (S) + PD
Q
4,800/181.42 (120) 181.42/2 (35) 350 (4,800)
+ +

Tc = 3174.95 + 3174.85 + 1,680,000

Tc = 1,686,349.80

b √(2𝐷𝑆/𝐻)
i Q100 =

√(2(4,800)120/32.5)
=

Q2 = 188.27

Q D
Tc = C = 2 (H) +
Q (S) + PD

4,800/188.27 (120) 188.27/2 (32.5) 325 (4,800)

+ +

3,059.44 + 3059.3875 + 1,560,000

Tc = 1,566,118.82
 √(2𝐷𝑆/𝐻)
Q3 Q200 =

√(2(4,800)120/30)
Q200 =

196

Q D
Tc = C = 2 (H) + (S) + PD
Q

4,800/196 (120) 196/2 (30) 300 (4,800)

+ +

Tc = 2,939 + 2,940 1,440,000

Tc = 1,445,879 Not feasible

Q D
Tc(200) = C = 2 (H) + (S) + PD
Q
4,800/200 (120) 200/2 (30) 300 (4,800)
+ +

Tc(200) = 2,880 + 3,000 + 1,440,000

Tc(200) = 1,445,880 Feasible

Recommendation:
It is not feasible for Bell Computers to order 196 chips as computed above and get a
discount of $50 (i.e price of $300). Therefore, for Bells to achieve the discount, it needs to
order 200 chips or more at a time. Therefore, the order quantity that gives Bell Computers
the lowest inventory cost is 200 chips or more at a discount of $50 per chip