00:02
We have to determine whether paul peterson should take the quantity discount.
00:07
So we need to calculate the economic order quantity that is eoq and total cost for each option.
00:13
The eoq that is economic order quantity is the order quantity that minimizes the total cost considering both the ordering cost and carrying cost.
00:21
So now let's calculate the eoq for each quantity discount option.
00:25
So for quantities ranging from 0 to 1999 units, unit price is equal to $10, annual demand is equal to 20 ,000 units, ordering cost that is s is equal to $100 per order, annual demand is d and carrying cost per unit that is h is equal to 0 .5 multiplied by unit price is equal to putting the values 0 .5 multiplied by $10.
01:43
So evaluating it we get $5.
01:47
Now eoq that is economic order quantity is equal to root 2 multiplied by d multiplied by s divided by h which is equal to putting the values 2 multiplied by 20 ,000 multiplied by 100 divided by 5 is equal to $40 ,00 ,000 divided by 5 which is equal to root 8 ,00 ,000.
02:33
So we get eoq is approximately 894 units which is rounded to the nearest whole unit.
02:44
Now total cost for option 1, total cost is equal to root d multiplied by s divided by eoq added to eoq multiplied by h divided by 2 added to d multiplied by unit price.
03:23
Sorry there was no root.
03:32
So now putting the values 20 ,000 multiplied by 100 divided by 894 added to 894 multiplied by 5 divided by 2 added to 20 ,000 multiplied by 10.
03:56
So evaluating it we get approximately 22 ,377 .15.
04:04
Now for quantities ranging from 2000 to 3 ,999 units, unit price is equal to $9 .98.
04:38
Then annual demand that is d is equal to 20 ,000 units...