Question: A small manufacturing company uses continuous review system for a given product. The average demand for the product is 125 units a day and

A small manufacturing company uses continuous review system for a given product. The average demand for the product is 125 units a day and the unit price is $5. It costs $25 to process each order and there is a seven-day lead-time. The holding cost is 12.5% of the price of the product per year. Company operates 200 days per year. You have been given that the appropriate EOQ is 1415. Suppose the supplier offers you a discount if you buy more than 2,500 units in a single order. If you buy 2,500 units or more, you pay $4 per unit. Perform the necessary calculation to determine if you would take the discount. What would be the appropriate order size?

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