On the case above:

1) Using the eoq methods outlined in the chapter, how many kegs of nails should Low order at one time?

2) Assume all conditions in Q 1 hold, except that Lows supplier now offers a quantity discount in the form of absorbing all or part of Lows order processing costs. For orders 750 or more kegs of nails, supplier will absorb all the costs. For orders between 249 and 749 kegs, supplier will absorb half. What is Lows new Eoq?

3) Temporarily ignore work on Q2. Assume that Lows warehouse offers to rent Low space on the basis of the average number of kegs Low will have in stock, rather than on the maximum number of kegs Low would need room for whenever a new shipment arrived. The storage charge per keg remains the same. Does this change the answer to Q1? If so, what is the new answer?

4) Take into account the answer to Q1 and the suppliers new policy outlined in Q2 and the warehouses new policy in Q3. The. Determine Lows new EOQ.

5) Based on your answers for Q1,2,3,4 calculate Low Nails EOQ for kegs of nails.

After making some wise short-term investments at a race track, Chris Low had some additional cash to invest in a business. The most promising opportunity at the time was in building supplies so Low bought a business that specialized in sales of one size of nail. The annual volume of nails was 2,000 kegs, and they were sold to retail customers in an even flow. Low was uncertain how many nails to order at any time. Initially, only two costs concerned him: order-processing costs which were $60 per order without regard to size, and warehousing costs, which were $1 per year per keg space. This meant that Low had to rent a constant amount of warehouse space for the year, and it had to be large enough to accommodate an entire order when it arrived. Low was notworried about maintaining safety stocks, mainly because the outward flow of goods was so even. Low bought his nails on a delivered basis