HighTech Computers wants to reduce a large stock of personal computers it is discontinuing. It has offered the university bookstore at SuperDuper U a quantity discount pricing schedule if the bookstore will purchase the personal computers in volume, as follows:
1 – 49 $1,400
The annual carrying cost for the bookstore for a computer is $190, the ordering cost is $2,500, and the annual demand for this particular model is estimated to be 200 units. The bookstore wants to determine if it should take advantage of this discount or order the basic EOQ order size.