Example Supplier of paint to the maintenance department has announced new pricing: $8 per gallon if order is < 300 gallons $6 per gallon if order is ≥ 300 gallons Data remains as before: K = 16, I = 25%, l = 3600 Is this a case of all units or incremental discount?

Solution Step 1: For Price 1: Step 2: As Q(1) < 300, EOQ is realizable. Step 3: Price 2: Step 4: As Q(2) < 300, EOQ is not realizable.

Cost Function Realizable G(Q|p1) G(Q|p2) Not Realizable C(Q) 240 277 300 Q

Cost Function Only possible solutions G(Q|p1) G(Q|p2) C(Q) 240 277 300

Solution Step 5: Compare costs of possible solutions. For $8 price, Q=240: For $6 price, Q=300: Q=300 is the optimal quantity.