Q1. Suppose Big Box Office Supply (BBOS) purchases 100,000 office chairs every year. Ordering costs are $95.00 per order and carrying costs are $3.75 per chair. What is BBOS's total inventory cost per year, including both carrying costs and ordering costs, if BBOS orders the EOQ of office chairs?
Q2.Using the data from problem 1, Big Box Office Supply (BBOS) is able to negotiate a reduction in the carrying costs to $3.50 per chair, but BBOS's chair supplier offers a quantity discount of $0.25
per chair if BBOS orders 5,000 chairs at a time rather than the EOQ. Determine the before-tax benefit or loss of accepting the quantity discount. (Assume the carrying cost remains at $3.50 per chair whether or not the discount is taken.)
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