Problem 1: Read the following problem and answer the following questions: 1- What is the EOQ * that corresponds to each of the discounts? 2- What is the Total Annual Cost for each of the discounts with respect to their amounts? 3- What is the company's policy finally? Set the optimal order quantity with discount and your reorder point. [Q *, ROP] 4- Discuss the results of this problem.

Wohl's Discount Store stocks toy race cars. Recently, the store has been given a quantity discount sched- ule for these cars. This quantity schedule was shown in Table 12.2. Thus, the normal cost for the toy race cars is $5.00. For orders between 1,000 and 1,999 units, the unit cost drops to $4.80; for orders of 2,000 or more units, the unit cost is only $4.75. Furthermore, ordering cost is $49.00 per order, annual demand is 5,000 race cars, and inventory carrying charge, as a percent of cost, I, is 20%, or .2. What order quan- tity will minimize the total inventory cost? Discount # Discount aty Discount % Discount price ($) 1 0 to 999 No discount $ 5.00 1,000 to 1,999 $ 4.80 2,000 and over 2 4 N 3 5 $ 4.75