Company ABC sells computer to shops. The average demand is 5,000 units each month. ABC incurs a fixed order placement, transportation, & receive cost of $4,500 each time an order is placed. It also incurs a holding cost of 10% of the unit cost of the product. The normal wholesale price is $600 per unit.

Order Quantity Per Lot - Price Per Unit

1 to 2,500 - $600

2,501 - 5,000 - $540

Over 5000 - $510

1) What is the EOQ if there is no volume discount?

2) What is the total annual cost assuming there is no volume discount & the price per unit is $600?

3) What is the EOQ for the shop upon taking the volume discount?

3) What is the new total annual cost for the shop upon taking the quantity discount in comparison with the normal situation where there is no volume discount?