Dave's Sporting Goods sells Mountain Mouse freeze-dried meals. Dave's uses a continuous review system to manage meal inventories. Suppose Mountain Mouse offers the following volume discounts to its customers:
1-500 meals: $7 per meal 501 or more meals: $6.50 per meal
Annual demand is 2,000 meals, and the cost to place an order is $15. Suppose the holding cost is $2 per meal per year. How many meals should Dave's order at a time? What are the total holding, ordering, and item costs associated with this quantity?