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An oil Change Shop is trying to determine how many cases of engine oil and oil change shop should order from its distributor. They use 60,000 cases of oil per year. The annual holding cost is 20% of the item cost. The ordering cost is $8.50 per order. The distributor delivers their orders all at one time, but offers the following quantity discount schedule:
Quantity price ($)
1– 999 5.00
1000-1999 4.50
2000+ 4.25
What is the EOQ for each item price? Are they feasible (match)? What is the optimum condition (order size) and total cost (ordering, holding and item cost)?
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