A retailer sells about 5,000 units per year of a particular item. The following data has been found for this item:

A = $100 v = $2 per unit r = 0.28 $/$/year The retailer is now using an order quantity of 500 units. A keen analyst observes that savings could be realized by instead using the EOQ. The retail manager says to forget about mathematics—he has a way of reducing the setup cost to only $25. He argues for doing this and retaining the current order quantity. Who is right? Discuss.