Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price is governed by a quantity discount structure. If the restaurant orders 100 or more units, the price per kit is $11. Below 100 units, the price is $12 per kit. What is total annual cost at the optimal order quantity?

Question

Quizplus · Accepted Answer

The total annual cost includes the purchase cost, ordering cost, and holding cost. The EOQ model helps determine the optimal order quantity to minimize these costs. Given the quantity discount, the optimal order quantity would be 100 or more units at $11 per kit. The total annual cost can be calculated using the EOQ formula and the given price structure.

Flanders Bar and Grill Orders Cleaning Supply Kits Using the EOQ