Point uses the economic order quantity (EOQ) model to establish the reorder quantity for raw material Y. The company holds no buffer inventory. Information relating to raw material Y is as follows:

Annual usage 48,000 units

Purchase price $80 per unit

Ordering costs $120 per order

Annual holding costs 10% of the purchase price

Required: Calculate

a.The EOQ for raw material Y is

b.The total annual cost of purchasing, ordering and holding inventory of raw material Y is:

c.The supplier has offered Point a discount of 1% on the purchase price if each order placed is for 2,000 units.

Calculate the total annual saving to Point of accepting this offer.