Answer:
The company will save $10,500 every year.
Explanation:
Giving the following information:
Supply purchases 50,000 boxes of pens every year.
Ordering costs are $100 per order.
Carrying costs are $0.40 per box.
Management has determined that the EOQ is 5,000 boxes.
The vendor now offers a quantity discount of $0.20 per box if the company buys pens in order sizes of 10,000 boxes.
Cost per order 1= 5000*0.40 + 100= $2,100
Total cost= 2,100* 10= $21,000
Cost per order 2= 10000*0.40 + 100 - 10000*0.2= 2,100
Total cost= 2,100*5= $10,500
We don't have any information on the cost of having inventory. It is cheaper to make bigger orders and save money ordering costs and take advantage of the discount.
