Prestige Bears Ltd carries a wide assortment of luxury teddy bears for its customers. One item, KPS is very popular. In order to keep its stock under control, a decision is taken by management to order only the optimum economic quantity, for this item, each time. You have the following information

Annual demand (units) 144,000

The purchase price per unit $ 400

Carrying/Holding costs per unit$ 12

Cost per order $ 750

Required:

1. Determine the EOQ using the equation method.
2. Prestige Bears Ltd hasbeen offered a 1 percent discount on the cost if it places orders in quantities of 18,000. Discuss whether the company should accept the discount and place larger orders, show your workings.