A company uses Rs. 50000 material per year. The cost per order is Rs. 50 and carrying cost is 20 percent of the average inventory. The company currently has an optimum purchasing policy but has been offered a 0.4 percent discount if they purchase 5 times per year. Should the offer be accepted? If not what counter offer should be made?
Answers
A company uses Rs. 50000 material per year. The cost per order is Rs. 50 and carrying cost is 20 percent of the average inventory. The company currently has an optimum purchasing policy but has been offered a 0.4 percent discount if they purchase 5 times per year. Should the offer
Answer:
If a company uses Rs 50,000 material per year, and cost price per order being Rs 50 per order, it clearly depicts that the total number of products being purchased is 50,000/ 50 = 10,000 units. When the company gets the offer of getting a discount of 0.4% more on purchase of 5 times within a year.
Explanation:
In this way the company has to purchase about 50,000 units of material, in order to get the discount, according to me this should not be taken as a business plan, because it may reduce purchasing cost, but if sales are not in par then it may become the liability of the company.