5. GC manufactures a range of bicycles and holds an inventory of certain bicycle parts. Part number 1258 costs P8.00 per unit. GC expects to use 8,000 units of part 1258 per annum. Ordering costs have been determined to be P150 per order an inventory holding costs have been estimated at P2.75 per unit per annum. The supplier of part number 1258 has offered a 2% discount off the purchase price if each order is for 2,000 units or more.

Required: a. Calculate the economic order quantity for part 1258, assuming no discount is given. (3 marks)

b. Determine whether GC should accept the discount offered. (8 marks)