The printshop at State University purchases from a vendor sweatshirts emblazoned with the school name and logo. The vendor sells the sweatshirts to the printshop for $38 a piece. The cost to the printshop for placing an order is $120, and the carrying cost is 25% of the purchase price. The printshop manager estimates that 1,700 sweatshirts will be sold during the year. The vendor has offered the printshop the following volume discount schedule.
Order Size Discount % Price Carrying cost
1-299 0%
300-499 2%
500-799 4%
800+ 5%
The printshop manager wants to determine the printshop's optimal order quantity, given the foregoing quantity discount information.
1. Determine carrying cost as a percentage of purchase price.
2. Calculate EOQ for each discount price.
3. Calculate TC for each EOQ.
4. What is the printshop's optimal order quantity?