Binny Foods manufactures spicy baked potato chips. The baked chips manufacturing process uses three (3) ingredients (items) – potatoes, chili powder, and salt. Binny purchases these three (3) items from the same supplier. The inventory attributes for these three (3) items are shown in the table below. The supplier offers a discount of 5% on any individual item that has an order size of 750 kg or more. Compute the EOQ for the three (3) items. The ordering cost is ₱20 per order, and the carrying rate is 15% per year.
Item name Annual demand Unit price
Potatoes 5,000 kg ₱4 per kg
Chili powder 800 kg ₱40 per kg
Salt 1,200 kg ₱0.5 per kg
A. EOQ and TC with original values (6 items)
B. EOQ and TC with a discount (5% discount for each individual item that has an order size of 750 kg or more) (3 items)