The manager at Robert's Cigars wants to determine the lowest cost order policy given the following purchase discounts offered: cigar costs are $5 each for orders less than 500; $4.50 each for orders of 500 - 1000; and $4.00 each for orders greater than 1000. The order cost = $75, annual demand forecast = 5500 cigars, and inventory carrying cost = 15% per year.

 Determine what is the lowest cost order policy.  In other words;

- what would be the optimal order size,

- what would be the price of each cigar, and

- what would the total inventory cost be?

Hint: Calculate the EOQs for each discounted price point.  Determine the total inventory cost (APC + AHC + AOC) for each EOQ.  The lowest total inventory cost would be the best option.