The demand for a particular part called SKU 005 is 1,200 units a year. The cost of one SKU 005 is $40.00. It costs $35.00 to place an order of SKU 005, and the holding cost per unit per year is 28% of unit cost.
a. What is the combined annual holding and ordering cost of an order size of 200 units for SKU 005?
b. What is the economic order quantity for SKU 005?
c. The vendor who sells SKU 005 has just offered a 10% discount for orders of 500 or more. Now how many should be ordered?