The Andy Dandy Candy Company has asked you to recommend an EOQ for their Jelly Bean product. They have provided you with the following information:

a. The only costs involved are the cost of ordering and the cost of holding the inventory that is equal to the average amount of capital times $0.30. Back orders are not allowed, and there are no other costs.

b. The company always has a sale when a shipment of Jelly Beans arrives, until half of the shipment is gone, at which time the company raises its price.

This implies that there are two known, continuous, constant rates of demand D2 and D1, D1 being the rate during the sale, with D1 > D2. As a consultant, you are requested to recommend an EOQ formula for this situation. In your report, you must specifically cover the following points:

a. A graphical representation of the inventory process. (What is the fraction of time spent at the rate D1?)

b. A total cost equation, defining the terms.

c. A brief explanation of the method of obtaining the optimal order quantity.

d. A numerical example using A = $20; vr = $2; D1 = 30; and D2 = 15.

e. How much should be ordered in the above numerical example if D1 = D2 = 30?