Hello,

I am struggling on this problem. Here is the set up.

Quantity Discount Scenario:

You purchase the promotional tee shirts for a large business. You purchase 5,000 units a year. You estimate the cost to hold at 45% of the purchase cost because these take a lot of storage room. The ordering costs at $25 per order. Your vendor gives you the following pricing information.

Order Quantity (units)	Unit Price
Less than 500	$5.00
500 to1,499	$4.75
1,500or more	$4.50

Now I am to follow the 4 steps below and solve the questions at the end. I have question 1 complete but I am unsure what to do after that. Can you please help?

1. Calculate the EOQ in the case of each potential purchase price.

Order Quantity	Price	Order Cost	Holding Cost	EOQ
Less than 500	5	25	0.45	333
500 to1,499	4.75	25	0.45	342
1,500or more	4.5	25	0.45	351

2. Review the results of step 1 and eliminate all invalid EOQs. An invalid EOQ will

be an order size that does not actually fall within the range of Q that the purchase

price used to calculate parameter H that the EOQ formula requires.

3. If the only EOQ that remains qualifies its purchaser for the lowest price offered by

the supplier, then this is the optimal order size and the analysis is complete. If not,

proceed to step 4.

4. Calculate the total relevant annual cost of the valid EOQ remaining from step 2.

This total cost should include ordering costs, holding costs, and the purchasing costs resulting from using this EOQ as the ordering size policy.

How many should you order? What is the total cost (inventory and product) for your recommended order quantity?