HIJ Ltd sells 3,000 tonnes of soil each year and demand is constant over time. The purchase cost of each tonne is $3 and the cost of placing and handling an order is estimated to be $5. The cost of holding 1 tonne of soil for one year is estimated to be $3. The business uses the EOQ model to determine the appropriate order quantity and holds no buffer inventories.

HIJ Ltd purchases the soil from the supplier on credit. It usually takes 60 days to pay the suppliers. Because of the recent economic issue, the supplier wants HIJ Ltd to pay within 30 days and offers 4% discount for early payment.