A manufacturing company uses 50,000 materials per year. The administration cost per purchase is 50, and the carrying cost is 20% of the average inventory. The company currently has an optimum purchasing policy but has been offered a 0.4 per cent discount. if they purchase five times per year. Should the offer be accepted ? If not, what counter offer should be made
Answers
Answer:
company uses yearly material=50,000 RS.
Cost per Order = 50 RS.
Carrying cost=20 percent of average inventory
currently optimum purchasing policy=0.4 percent discount on 5 times per year
Cost per Order = 50 RS.
5 times order cost=50*5=250
Total cost=50,000+250=50.250
discount-0.4%
50,250*(0.4/100)=201
discount =201
250-201=49
we will have to pay 49 rupees more if we purchase five times a year
offer should not be accepted
the offer should be without per order cost
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.