What is the net benefit in dollars

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Each year, Holly's Best Salad Dressing, Inc. (HBSD) purchases 50,000 gallons of extra virgin olive oil. Ordering costs are $90 per order, and the carrying cost, as a percentage of inventory value, is 80 percent. The purchase price to HBSD is $0.50 per gallon.

(a) What is HBSD's EOQ in gallons?

(b) HBSD's management currently orders the EOQ each time an order is placed. No safety stock is carried. The supplier is now offering a quantity discount of $0.03 per gallon if HBSD orders 10,000 gallons at a time. What is the net benefit in dollars if HBSD takes the discount?

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Reference no: EM13949358

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