You are lucky enough to be the owner of IMSE Pizza, a new establishment in Aggieville. As such you sell 3000 pizzas every month. You buy the pizza dough in a batch of 2000 pounds, calculate using EOQ (l) Your holding cost consist of 36% per year, and the dough costs you $4 per pound.
What is the setup cost used in finding the EOQ order size?
Now, you received an offer from another dough supplier (Tony's in Salina) to give you 5% price discount if you buy the dough in quantity of 3000 pounds a batch or more. Should you accept the offer from Tony's?