Arena Vending annually sells large quantities of soft drinks and beer in plastic cups
with the name of the arena and the various team logos on them. The local container
cup manufacturer that supplies the cups in boxes of 100 has offered arena

management the following discount price schedule for the cups:

Order Quantity (boxes) Price per Box
1,000 —4,999 $60
5,000 – 9,999 $56

10,000 – 14,999 $54
15,000+ $52

The annual demand for the cups is 2.3 million (i.e. 23,000 boxes), the annual carrying
cost per box of cupsis $12, and the ordering cost is $320. Determine the optimal order
quantity and total annual inventory cost. (60 marks)

What is the difference between dependent and independent demand inventory
items? Give examples of each type of demand for a ear manufacturer such as Toyota
or Ford. (40 marks)

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