Reference no: EM131500459

A large hospital's nursery uses disposable diapers for its newborn babies at a rate of 60 cases per day. Ordering costs have been estimated at $50 per order. The hospital's Accounting Department has assigned a holding costs fraction of 0.15 to the nursery supplies. All the assumptions of the basic EOQ model, such as zero lead time, are applicable. The purchasing agent for the hospital has an opportunity to take advantage of one of several quantity discounts. The pricing schedule is listed below.

Quanity Ordered                                   Unit Price ($)

0-1,999                                                      2.50

2,000-4999                                                 2.45

5000-10,000                                               2.40

Over 10,000                                               2.35

*(One year= 300 days, 52 weeks, Month= 25 days), Annual Demand

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