A Brazilian exporter approaches Maxim's caf and presents an all-unit quantity discount offer of Brazilian coffee beans. If the purchase lot size is 500 kg or more, a 1% discount of the regular price $250 per kg is offered. For Maxim's caf, the holding cost per kg per year is 5% of the purchase price per kg, the ordering cost is $10 per order, and the annual demand of Brazilian coffee beans is 4,000 kg. The assumptions of Economic Order Quantity (EOQ) model are satisfied.

Q1A If Maxim's caf wants to purchase coffee beans at the regular price, determine the EOQ of coffee beans. 

Q1A If Maxim's caf wants to purchase coffee beans at the regular price, determine the total annual cost (including annual material, ordering and holding costs) based on the regular price. 

Q1B If Maxim's caf wants to purchase coffee beans at the discounted price, determine the EOQ of coffee beans. 

Q1B If Maxim's caf wants to purchase coffee beans at the discounted price, determine the total annual cost (including annual material, ordering and holding costs) based on the discounted price. 

Answer rating: 100% (QA)

Q1A Determining EOQ at Regular Price To calculate the Economic Order Quantity EOQ at the regular price we need to use the following formula EOQ 2 D S ... View the full answer