The E.O Queue Hospital is trying to determine how many bedpans to buy at a time. They use approximately 2000 per year. Each bedpan costs the hospital $4. The hospital calculates their capital cost at a rate of 10 percent of the purchase price. Additional carrying cost are 60cent per unit. Every time the hospital places an order for bedpans, the labor cost in the purchasing department is $16 the shipping and handling cost for the order is 20 dollars, and other costs related to making an order are 4 dollars.
a) What is the economic order quantity?
b) Suppose that they could get a 10 percent discount per bedpan if they order at least 1000 at a time. Should they take advantage of this discount?