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Problem - You are the manager of Store A, a retail store selling snacks. As it does not make any of the products it sells, Store A needs to order its products from the suppliers.
Candy is Store A's most popular product. The setup cost of an order with the supplier is $70. In considering the storage and insurance requirements, the holding cost per box of Candy is estimated to be $0.8 per month. The supplier sells Candy to Store A at the unit cost of $60 per box.
But now, you design a new policy that Store A is to have a sale of Candy (565 per box) when a shipment of Candy from the supplier arrives, until half of the shipment is already purchased by Store A's customers, at which time Store A increases the price of Candy (to become $75 per box). When Candy is sold at $65 per box, the demand rate is 80 boxes per month. And when Candy is sold at $75 per box, the demand rate is 40 boxes per month.
Based on the above information: Determine the economic order quantity.
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