PROBLEM #2: (8 marks) Clement Bait and Tackle has been buying a chemical water conditioner for its bait (to help keep its baitsh alive) in an optimal fashion using EOQ analysis. The supplier has now offered Clement a discount of $1.00 or $2.00 off all units if the rm will purchase a large quantity. Current data for the problem are: D = 720 units per year; S = $6.00, h = 0.2/$/year. Range 1 Range 2 Range 3 Order Quantity 1-49 50-99 2100 Unit Price, C $25 $24 $23 int: Annual demand 2 D Order Quantity = Q Material cost = $C per unit; Fixed ordering cost = $8 per order Holding cost = $H per unit per year : hC, where h is a percentage D Number of orders per year = a _ DS Annual ordering cost = 3 Annual material cost = CD 2DS 1509*: Cycle (or average) inventory = hC 2 2 Annual holding cost = %H = ghc Total annual cost: TC = 3S + CD + ghc (a) What is the optimal order quantity for the product which results the minimum cost? (8 marks) (b) What is the average inventory (in terms of units)? (1 mark) (c) What is the order frequency (i.e., how many orders per year should be made)? (1 mark)