Question

Your factory buys and used a component for production at ` 10 per piece. Annual requirement
is 2,000 numbers. Carrying cost of inventory is 10% p.a. and ordering cost is ` 40 per order. The
purchase manager argues that as the ordering cost is very high, it is advantageous to place a single
order for the entire annual requirement. He also says that if we order 2,000 pieces at a time we can
get a 3% discount from the supplier. Evaluate this proposal and makes your recommendations.

Answer 1

Answer:

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