Answer to Question #298610 in Economics for dullu

Question

W Co is a retailer of barrels. The company has an annual demand of 30,000 barrels. The barrels 

cost TZS 2 each. Fresh supplies can be obtained immediately, with ordering and transport costs 

amounting to TZS 200 per order. The annual cost of holding one barrel in stock is estimated to 

be TZS 1.20.

A 2% discount is available on orders of at least 5,000 barrels and a 2.5% discount is available 

if the order quantity is 7,500 barrels or above.

Required: Calculate the EOQ ignoring the discount and determine if it would change once the 

discount is taken into account.

Answer 1

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