Answer: The answer is EOQ = 591.61 unit.
Explanation:EoQ =
√2DS/H
Where
D= demand in unit
S = ordering cost
H= Holding Cost
Demand =1,400
× 400 = 560,000 per year
Order Cost $25
Holding Cost = 20% of unit cost
20/100× 400 = $80 per item per year
√2DS/H
√2×560,000×25/80
√28,000,000/80
=√350,000
= 591.61
EOQ = 591.61 unit
If the owner orders 300 or more
300×400
=120,000
The discount will be
55/100×120,000
=66,000
120,000 - 66,000
=54,000
He should take the discount
