Pam runs a mail-order business for gym equipment. Annual demand for TricoFlexers is 18,000. The annual holding cost per unit is $2.30, and the cost to place an order is $50.
a.     What is the economic order quantity EOQ? (Complete the following and calculate the EOQ)
Q = order quantity =
H = annual holding cost per unit =
D = annual demand =
S = ordering cost =
-Suppose demand for TricoFlexers doubles, to 36,000. Does the EOQ also double? Explain what happens.     -The manufacturer of TricoFlexers has agreed to offer Pam a price discount of $5 per unit ($45 rather than $50) if she buys 1,500. Assuming that annual demand is still 18,000, (use the Quantity Discounts – Price reductions for ordering larger quantities.)
What is the total annual savings if she buys 1500 instead of the recommended EOQ calculated on question a above ?