A bookstore is attempting to determine the optimal order quantity for a popular cookbook. The store sells 5,000 copies of this book a year at a retail price of $12.50, although the publisher allows the store a 20% discount on this price. The store figures that it costs $1 per year to carry a book inventory and $100 to prepare an order for new books.

a) Determine the total costs associated with ordering 2,5, and 10 times a year.

b) Determine the economic order quantity (EOQ) and show that carry costs equal order costs at the EOQ. Illustrate answer with a graph (cost vs quantity).

c) Bookstore can obtain an additional 4 cents per book discount if it orders 1250 (or more) books at a time. Should the bookstore do this?