Example 11-7

All Unit Discount (Example 11-7) This worksheet calculates the total cost (column F)
for different values of order quantity (column A).
Fixed cost per order, S = $ 100.00 per order
The direct solution to the problem is
Monthly demand = 10,000 bottles on worksheet Example 11-7 check
Holding percentage, h = 20%
To study the impact of a lower fixed cost, change
the entry in Cell C3 to 4 and identify the lowest cost
order quantity.
Price per
Min Quantity bottle
q0 0 $ 3.00 C0
q1 5,000 $ 2.96 C1
q2 10,000 $ 2.92 C2

Initial Order Quantity = 1,000

Increment in Order Quantity = 250

Order Average Annual Annual Annual Total

Quantity Unit Cost Holding Cost Order Cost Material Cost Annual Cost
1,000 $ 3.00 $ 300 $ 12,000 $ 360,000 $ 372,300
1,250 $ 3.00 $ 375 $ 9,600 $ 360,000 $ 369,975
1,500 $ 3.00 $ 450 $ 8,000 $ 360,000 $ 368,450
1,750 $ 3.00 $ 525 $ 6,857 $ 360,000 $ 367,382
2,000 $ 3.00 $ 600 $ 6,000 $ 360,000 $ 366,600
2,250 $ 3.00 $ 675 $ 5,333 $ 360,000 $ 366,008
2,500 $ 3.00 $ 750 $ 4,800 $ 360,000 $ 365,550
2,750 $ 3.00 $ 825 $ 4,364 $ 360,000 $ 365,189
3,000 $ 3.00 $ 900 $ 4,000 $ 360,000 $ 364,900
3,250 $ 3.00 $ 975 $ 3,692 $ 360,000 $ 364,667
3,500 $ 3.00 $ 1,050 $ 3,429 $ 360,000 $ 364,479
3,750 $ 3.00 $ 1,125 $ 3,200 $ 360,000 $ 364,325
4,000 $ 3.00 $ 1,200 $ 3,000 $ 360,000 $ 364,200
4,250 $ 3.00 $ 1,275 $ 2,824 $ 360,000 $ 364,099
4,500 $ 3.00 $ 1,350 $ 2,667 $ 360,000 $ 364,017
4,750 $ 3.00 $ 1,425 $ 2,526 $ 360,000 $ 363,951
5,000 $ 2.96 $ 1,480 $ 2,400 $ 355,200 $ 359,080
5,250 $ 2.96 $ 1,554 $ 2,286 $ 355,200 $ 359,040
5,500 $ 2.96 $ 1,628 $ 2,182 $ 355,200 $ 359,010
5,750 $ 2.96 $ 1,702 $ 2,087 $ 355,200 $ 358,989
6,000 $ 2.96 $ 1,776 $ 2,000 $ 355,200 $ 358,976
6,250 $ 2.96 $ 1,850 $ 1,920 $ 355,200 $ 358,970
6,500 $ 2.96 $ 1,924 $ 1,846 $ 355,200 $ 358,970
6,750 $ 2.96 $ 1,998 $ 1,778 $ 355,200 $ 358,976
 Example 11-7

7,000 $ 2.96 $ 2,072 $ 1,714 $ 355,200 $ 358,986

7,250 $ 2.96 $ 2,146 $ 1,655 $ 355,200 $ 359,001
7,500 $ 2.96 $ 2,220 $ 1,600 $ 355,200 $ 359,020
7,750 $ 2.96 $ 2,294 $ 1,548 $ 355,200 $ 359,042
 Example 11-7 chart

Total annual cost versus order size

$368,000

$366,000

$364,000

$362,000

$360,000
Annual Cost

$358,000

$356,000

$354,000

$352,000

$350,000

$348,000
2,000 4,000 6,000 8,000 10,000 12,000 14,000
Order Size
 Example 11-7 check

All Unit Discount (Example 11-7)

To see the impact of lower fixed cost S, change
Cell C3 to 4, and evaluate the order quantity
Fixed cost per order = $ 100.00 per order with the minimum total cost.
Monthly demand = 10,000 bottles
Holding percentage = 0.2

Pricing:
Min Qty Price per sq. ft.
q0 0 $ 3.00 C0
q1 5,000 $ 2.96 C1
q2 10,000 $ 2.92 C2

Range Q Price paid per Total Cost

i (Eqn 11.10) Adjust to q unit (Eqn 11.11)
0 6,325 5,000 2.96 $ 359,080
1 6,367 6,367 2.96 $ 358,969
2 6,411 10,000 2.92 $ 354,520

Without Quantity Discount

Price per sq ft Q Total Cost
$ 3.00 6,325 $ 361,916
 Example 11-7 check

wer fixed cost S, change

te the order quantity
cost.
 Example 11-8
Marginal Unit Quantity Discount (Example 11-8)

Fixed cost per order = $ 100 per order

Monthly demand = 10,000 bottles This worksheet calculates the total cost (column F)
for different values of order quantity (column A).
Holding percentage = 20%
The direct solution to the problem is
on worksheet Example 11-8 check
Pricing: Quantity Price per sq. ft.
q0 <5,000 $ 3.00 C0 To study the impact of a lower fixed cost, change
the entry in Cell C3 to 4 and identify the lowest cost
q1 5,000-10,000 $ 2.96 C1 order quantity.
q2 >10,000 $ 2.92 C2

Initial Order Quantity = 4,000

Increment in Order Quantity = 250

Order Average Annual Annual Annual Total

Quantity Unit Cost Holding Cost Order Cost Material Cost Annual Cost
4000 $ 3.000 $ 1,200 $ 3,000 $ 360,000 $ 364,200.000
4250 $ 3.000 $ 1,275 $ 2,824 $ 360,000 $ 364,098.529
4500 $ 3.000 $ 1,350 $ 2,667 $ 360,000 $ 364,016.667
4750 $ 3.000 $ 1,425 $ 2,526 $ 360,000 $ 363,951.316
5000 $ 3.000 $ 1,500 $ 2,400 $ 360,000 $ 363,900.000
5250 $ 2.998 $ 1,574 $ 2,286 $ 359,771 $ 363,631.143
5500 $ 2.996 $ 1,648 $ 2,182 $ 359,564 $ 363,393.455
5750 $ 2.995 $ 1,722 $ 2,087 $ 359,374 $ 363,182.870
6000 $ 2.993 $ 1,796 $ 2,000 $ 359,200 $ 362,996.000
6250 $ 2.992 $ 1,870 $ 1,920 $ 359,040 $ 362,830.0000
6500 $ 2.991 $ 1,944 $ 1,846 $ 358,892 $ 362,682.4615
6750 $ 2.990 $ 2,018 $ 1,778 $ 358,756 $ 362,551.3333
7000 $ 2.989 $ 2,092 $ 1,714 $ 358,629 $ 362,434.86
7250 $ 2.988 $ 2,166 $ 1,655 $ 358,510 $ 362,331.52
7500 $ 2.987 $ 2,240 $ 1,600 $ 358,400 $ 362,240.00
7750 $ 2.986 $ 2,314 $ 1,548 $ 358,297 $ 362,159.16
8000 $ 2.985 $ 2,388 $ 1,500 $ 358,200 $ 362,088.00
8250 $ 2.984 $ 2,462 $ 1,455 $ 358,109 $ 362,025.64
8500 $ 2.984 $ 2,536 $ 1,412 $ 358,024 $ 361,971.29
8750 $ 2.983 $ 2,610 $ 1,371 $ 357,943 $ 361,924.29
9000 $ 2.982 $ 2,684 $ 1,333 $ 357,867 $ 361,884.00
9250 $ 2.982 $ 2,758 $ 1,297 $ 357,795 $ 361,849.89
9500 $ 2.981 $ 2,832 $ 1,263 $ 357,726 $ 361,821.47
9750 $ 2.981 $ 2,906 $ 1,231 $ 357,662 $ 361,798.31
10000 $ 2.980 $ 2,980 $ 1,200 $ 357,600 $ 361,780.00
10250 $ 2.979 $ 3,053 $ 1,171 $ 357,424 $ 361,648.12
10500 $ 2.977 $ 3,126 $ 1,143 $ 357,257 $ 361,526.00
10750 $ 2.976 $ 3,199 $ 1,116 $ 357,098 $ 361,412.95
11000 $ 2.975 $ 3,272 $ 1,091 $ 356,945 $ 361,308.36
11250 $ 2.973 $ 3,345 $ 1,067 $ 356,800 $ 361,211.67
11500 $ 2.972 $ 3,418 $ Example
1,043 $11-8 356,661 $ 361,122.35
11750 $ 2.971 $ 3,491 $ 1,021 $ 356,528 $ 361,039.94
 Total Cost with Varying Order Size

$365,000.000

$364,000.000

$363,000.000

$362,000.000
Annual Cost

$361,000.000

$360,000.000

$359,000.000

$358,000.000
0 0 00 0 0 00 0 0 0 0 00 0 0 00 00 0 0 00 00 0 0 00 00 00 00 0 0 00 00 0 0 00 00 00 00 00 00 0 0 00 00
40 45 50 55 60 65 70 75 80 85 90 95 100 10 5 110 115 12 0 125 13 0 13 5 140 14 5 150 155 16 0 165 17 0 175 18 0 18 5 190
Order Size ('000)
 Example 11-8 check

Marginal Unit Quantity Discount (Example 11-8)

Fixed cost per order, S = $ 100.00 per order To see the impact of lower fixed cost S, change
Monthly demand = 10,000 bottles Cell C3 to 4, and evaluate the order quantity
with the minimum total cost.
Holding percentage, h = 20
Pricing:
Min Qty Price per sq. ft.
q0 0 $ 3.00 C0
q1 5,000 $ 2.96 C1
q2 10,000 $ 2.92 C2

Vi Total Cost TCi

Range (Eqn 11.12) Qi (Eqn 11.13) Adjust to Qi* (Eqn 11.14)
0 0 6,325 5,000 $ 363,900
1 15,000 11,028 10,000 $ 361,780
2 29,800 16,961 16,961 $ 360,365

Without Quantity Discount

Price per sq ft Q Total Cost
$ 3.00 6,325 $ 363,795
 Example 11-8 check

xed cost S, change

e order quantity
.