Apply the EOQ model to the following quantity discount situation in which D = 400 units...
Apply the EOQ model to the following quantity discount situation in which D = 400 units per year, Co = $44, and the annual holding cost rate is 20%.
| Discount Category |
Order Size |
Discount (%) |
Unit Cost |
| 1 | 0 to 99 | 0 | $10.00 |
| 2 | 100 or more | 3 | $9.70 |
What order quantity do you recommend? If required, round your answer to the nearest whole number.
Homework Answers
EOQ Quantity = (2*Annual Demand*Ordering Cost per order/Carrying cost per Unit)^1/2
= (2*400*44/2)
= 132.66 units
Number of orders = 400/133 = 3
Since the discount is also available at EOQ, 133 units should be purchased at a time
3 orders of 133, 133 and 134 units
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