Intermediate: Quantity discounts A company uses 50000 units of material per annum to service a steady demand for its products. Order costs are £100 per order and holding costs are £0.40 per order.

(a) Determine the optimal order quantity.

(b) The supplier now offers a quantity discount of £0.02 per unit if it buys in batches of 10 000 units. Should the company take advantage of the quantity discount?