Mamas Home Kitchen in Budapest uses 3,000 pounds of meat each month. The owner, Mama, has learned that the meat was replenished using an EOQ value of 2,000 pounds. This values was computed assuming an interest rate of 36% per year. The current cost of the meat is $4 per pound.

a) What is the setup cost in determining the EOQ value?

b) If they received an offer from a meat wholesaler that there is a 5% discount if they purchase meat in quantities of 3,000 pounds or more, should Mama accept this offer? If yes, how much could she save?

c) If Mama has actually misunderstood the offer and the 5% discount is only offered to the amounts over 3,000 pounds, should this offer be accepted? If yes, how much could be saved?