1. 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?

2. 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.

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

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

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