Question: Refer to the inventory problem of Example 2. If the distributor offers a discount of $1 per case for orders of 600 or more cases,

Refer to the inventory problem of Example 2. If the distributor offers a discount of $1 per case for orders of 600 or more cases, should the manager change the quantity ordered?

Example 2

Suppose that the manager in Example 1 wants to establish an optimal inventory policy for frozen orange juice. Again, it is estimated that a total of 1200 cases will be sold at a steady rate during the next year. The manager plans to place several orders of the same size spaced equally throughout the year. Use the following data to determine the economic order quantity; that is, the order size that minimizes the total ordering and carrying cost.

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