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Company A purchases 3 6 , 0 0 0 bags of sugar each year. They pay $ 2 0 to place each order and have

Company A purchases 36,000 bags of sugar each year. They pay $20 to place each order and have an annual carrying cost of 20% of the purchase price per bag. Each bag costs $2 and management likes to keep 500 bags for safety stock. The sugar vendor now offers a quantity discount of $0.05 per bag when Margos orders 10,000 bags. Determine the EOQ. Calculate the Total Inventory Cost at EOQ with safety stock. Determine the before tax benefit or loss of accepting the quantity discount.

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