Refer to problem 10.3. The supplier offers a 2% discount on orders of 5000 units. Calculate the purchase cost, the cost of ordering, the cost of carrying, and the total cost if orders of 5000 are placed. Compare the results and calculate the savings if the discount is taken.

In Problem 10.3

A company decides to establish an EOQ for an item. The annual demand is 400,000 units, each costing $9, ordering costs are $35 per order, and inventory carrying costs are 22%.