A hospital orders its thermometers from a hospital supply firm. The cost per thermometer depends on the

Question:

A hospital orders its thermometers from a hospital supply firm. The cost per thermometer depends on the order quantity Q, as shown in the file P12_58.xlsx. The annual holding cost is 25% of the purchasing cost. Let Q₈₀ be the optimal EOQ order quantity if the cost per thermometer is $0.80, and let Q₇₉ be defined similarly if the cost per thermometer is $0.79.

a. Explain why Q₇₉ will be larger than Q₈₀.

b. Explain why the optimal order quantity must be Q₇₉, Q₈₀, or 100.

c. If Q₈₀ > 100, explain why the optimal order quantity must be Q₇₉.

d. If Q₈₀ < 100 and Q₇₉ < 100, explain why the optimal order quantity must be Q₈₀ or 100.

e. If Q₈₀ < 100 and Q₇₉ < 100, explain why the optimal order quantity must be Q₇₉.