Reference no: EM13967160

Memorable Knights has a number of contracts to plan and execute promotional events for large for-profit and non-profit organizations. Such events usually publicize products and services or support fundraising and typically include full or limited catering. Owing to the scale of their operations Memorable Knights tends to purchase and inventory supplies in bulk. One item used at virtually every Memorable Knights event is the ubiquitous 16-ounce red Solo cup. Last year Memorable Knights used 700,000 of these for all its events. The usual vendor ships these to Memorable Knights in cases packed with 1000 cups and to stimulate sales is offering a quantity discount arrangement. Base Price: The vendor prices case-quantities of 16-ounce cups at $140. Memorable Knights pays shipping and of course must handle and hold the cases in its storage warehouse. They estimate ordering costs at roughly $200 per order and annual holding costs in their inventory at 17% of item value. Discount Option 1: The vendor will discount the per-case price case to $138.25 on all orders for at least 300 cases. Discount Option 2: The vendor will give a further per-case discount price of $137.00 on all orders of at least 600 cases. a. Given the vendor’s price schedule, would it be least expensive (considering ordering cost, holding cost, and item price) for Memorable Knights to purchase cases of Solo cups according to EOQ, or at another quantity? b. Memorable Knights likes the case price offered on Discount Option 2, but the quantity which must be purchased to qualify for that price is too high. If Option 2’s price is retained what quantity will result in a total annual cost equal to that of Option 1 or the Base Price, whichever is less?