The bookstore at State University purchases from a vendor sweatshirts emblazoned with the school name and logo. The vendor sells the sweatshirts to the store for $38 apiece. The cost to the bookstore for placing an order is $120, and the carrying cost is 25% of the average annual inventory value. The bookstore manager estimates that 1,700 sweatshirts will be sold during the year. The vendor has offered the bookstore the following volume discount schedule:
Order Size ...... Discount %
1–299 ...... 0
300–499 ..... 2
500–799 ..... 4
800+ ........ 5
The bookstore manager wants to determine the bookstore’s optimal order quantity, given the foregoing quantity discount information.