Question

A company buys 8,000 units of an item for its annual requirements. Each unit costs 7 10. The ordering
cost per order is 30 and the carrying cost is 7.5% of the average inventory per year.
(a) Determine the economic order quantity and the total inventory cost.
(b) Should the company accept an offer of 2% discount in price on 4 bigger orders of quarterly
requirements of the material?​

Answer 1

Answer:

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Explanation:

❤️ Wait for the free movement

Answer 2

Yes, company can accept the offer.

Annual requirement of cost = 8000 units.

cost of each unit = ₹710

ordering cost per order ₹30

carrying cost = 710*7.5%

                       = 53.25

Economic order quantity = $\sqrt{2AO/C}$

                                            = $\sqrt{2*8000*30/53.25}$

                                            = 95 Units

Total inventory cost =

Cost of inventory = 8000*710 = 5680000

ordering cost = 8000/95*30  =    2526

carrying cost = 5680000*7.5% = 426000

                                                   = 6108526

b) total cost = 8000*710-2%

                               = 8000*695.8 = 5566400

   ordering cost     = 4*30               = 120

   carrying cost= 5566400*7.5%  = 417480

                                                       = 5984000