How much is the EOQ for each quantity discount? How much should be the EOQ?
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ESTRELLA is a bike retailer located in the outskirts of Bacolod City. ESTRELLA purchases bikes from STORAGEHUB in orders of 250 bikes which is the current economic order quantity. STORAGEHUB is now offering the following bulk discounts to its customers: Price
- 0% discount on orders less than 499 P3,500
- 10% discount on orders above 500 units - 999 3,150
- 15% discount on orders above 1,000 units 2,975
ESTRELLA is wondering if the EOQ model is still the most economical and whether increasing the order size would actually be more beneficial. Following information is relevant to forming the decision:
- Annual demand is 5000 units
- Ordering cost is $100 per order
- Annual holding cost is 25%
How much is the EOQ for each quantity discount?
How much should be the EOQ?
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