Part of your business is selling modems for network connection. Demand for modems in your store is about 8,000 units per year. Ordering a shipment of modems costs about $500 in processing. A modem costs you $150 and holding a modem in inventory costs you 12% of its cost per year.
Now assume that the supplier gives you the following discount schedule:
0-499 $150
500-999 $149
1000-1999 $148
2000-4999 $147
5000- $146