2. When Gentle Electric was offered a volume discount, which costs were affected? What happened to EOQ? *Option #1 ($500 price per unit) Holding cost = Inventory carrying cost + outside warehouse cost =.2 * 500 + 12 = $112 Set-up cost 2 cost of unloading + clerical cost + expediting cost = .10 * 500/100 + 10 + 15 = 25.5 Flow rate = 1200 Q = square( 2* set-up cost * flow-rate/holding-cost) = square( 2*25.5*1200/112) = 23.4 *Option #2 ($490 per unit price) with $10 discount. Holding cost = .2*490 + 12 = $110 Set-up cost = .10*4901100 + 10 + 15 = 25.5 flow rate = 1200 Q = square ( 2*255 * 1200/110) = 23.6