QuantPro has recently developed a thriving business supplying add-on security protection for small businesses who operate their own internal networks. While QuantPro originally dealt exclusively with the U.S. Government Defense Department, it has branched into this new line of work with small businesses.One of the products it provides to its small business customers is a shielded cable that connects servers and printers to guard against hackers. These cables cost $1.50 a foot and the purchasing manager at the company has historically ordered 2,000 feet at a time. But yearly demand has now reached about 25,000 feet and this demand has been evenly spread over the year. The manager estimates that it costs her about $80 every time she places an order.She also believes that her carrying cost factor is 20 percent of the purchase cost per foot per year.

Terminology: Setup cost is the same as carrying cost, it's the cost of having an item sitting in inventory. Ordering cost is the same as setup cost, it's the cost of processing one order.

• Based on current annual demand and their historical order size of 2000ft, what is the current annual inventory cost (setup costs + holding costs)?

• Given the current demand levels, what would be the optimal economic order quantity? Please round to the closest unit.

• How much will the company save annually if they order at the optimal order quantity (in question 2) instead of the current 2,000 feet per order?

The supplier for this cable has recently started offering price discounts for large purchases.They will discount the price 3 percent for orders of 8,000 or more feet.

• If QuantPro takes the 3% discount deal and orders in quantities of 8000ft, how much more annual inventory cost (setup costs + holding costs) will they incur compared to the the cost at optimal order quantity?
• Considering the 3% discount, how much QuantPro would save onpurchasingcosts?
• Should QuantPro adopt (1) a 3% quantity discount, (2) NO discount, or (3) No discount AND order 2,000 feet at a time?