Given the following information concerning quantity discounts:

Order between 1 and 29 units for a price per unit of $9.00 Order between 30 and 99 units for a price per unit of $8.80 Order 100 units or more for a price per unit of $8.50

Annual demand = 1200 units Ordering costs = $10 per order Carrying costs = $2.50 per unit per year

1. Calculate the EOQ. Which of the statements below is correct?

a.The EOQ is approximately 98 units which results in a per-unit price of $8.80. Further analysis is needed to determine the best course of action to take.

b.The EOQ is approximately 98 units. If we go ahead and pay $9.00 per unit, no further analysis is needed.

c.The EOQ is approximately 98 units which result in a per-unit price of $8.80. No further analysis is needed to determine the best course of action to take.

2. Calculate the total inventory cost at the EOQ as well as the total inventory cost at the lowest possible quantity to get the per-unit quantity discount. Be sure to include the annual costs of purchasing the units themselves since it now varies with order quantity. Which of the statements below describe the best course of action to take?

a. It is better to order the minimum number of units necessary to obtain the quantity discount

b. It is better to order at the EOQ

c. We are indifferent as to whether to order at the EOQ or order enough to obtain the quantity discount

3. At the EOQ, total order costs equal $122.45, and total carrying costs equal $122.50. Purchasing 1200 units at $8.80 per unit shows total purchase costs of $10,560. Which of the statements below describes the costs at the minimum number of units necessary to obtain the quantity discount of $8.50 per unit?

a. The total cost to purchase 1200 units drops to $10,200

b. Total ordering costs decrease to $120.00 and total carrying costs increase to $125

c. the total annual inventory cost equals $10,445

d. All of the above

4. The number of units to order each time an order is placed is

a. 100 units or more

b. EXACTLY 100 units