The manager of the Old Dominion Company is considering an offer of quantity discounts on an item from its vendor. The company's requirement for the item is 8,000 units a year. Carrying cost is estimated to be \(\$ 2\) per year and ordering cost is \(\$ 40\)

per order. Currently, the firm purchases in lots of 400 units at a unit cost of \(\$ 5\). The quantity discount from the vendor is \(\$ 3.60\) per unit if orders are in lots of 1,000 units.

\section*{Required.}

(1) Should the manager accept the offer from the vendor?

(2) At what discount unit price would the company be indifferent between purchases in lots of 400 units and 1,000 units?