4-- Billy Goat Farms sends Veritable Vegetables a new price list:

Order Quantity (in cases) Price per case

0-1,999 $40.00

2,000 + $39.60

Veritable Vegetables makes canned soups. Veritable orders 10,000 cases of frozen broccoli per year from Billy Goat Farms.

You have the following additional information:

The average cost (in the purchasing and accounting departments) to place and process a single order with Billy Goat Farms is $5.

The average cost (in the factory) to receive and inspect a single order received from Billy Goat Farms is $20

The average annual cost to hold a case of broccoli in inventory is $8.

The current purchase price of one case of broccoli is $40.

The discount doesnt seem very large but when youre purchasing 10,000 cases per year, that still amounts to a $4,000 annual reduction in purchase costs.

a. Should Veritable Vegetables continue to order at the EOQ level or start ordering 2,000 cases at a time to take advantage of the quantity discount? (no changes to current costs, no new costs). Assume that Veritable Vegetables wants to minimize total costs.