Question $2$: Reconsider Question $1.$

Suppose the parameters of Question $1$ remain and LB can get the wheat $$our from a supplier with the following price scheme, determine the optimal order quantity in kilograms of wheat $$our and the annual total cost.

Weight in Kilograms Unit Price per kilogram

$1$ to $749$ $$8$:$0$

$750$ to $1499$ $$7$:$5$

$1500$ or more $$6$:$5$

Reference:

Question $1[10$ marks$]$

Lingnan Bakery $($LB$)$ uses at a steady rate of $50$ kilograms of wheat flour to produce bread daily. The

cost to order wheat flour from a supplier is $$S$ per order and the annual holding costs of the wheat flour

is $$10$ per kilogram. Consider LB operates $300$ days per year

If LB orders $1000$ kilograms of wheat flour each time and spends $$12500$ on ordering and holding

the wheat flour annually, show that the ordering cost of the wheat flour per order $S$ is $$500$ per

order $[2$ marks$]$

Will you advise LB to adopt the EOQ to order the wheat flour? Justify your answer. $[8$ marks$]$