Example 62(a). A manufacturing firm purchases 2000 units of a particular item per year at a unit cost of Rs 80. The ordering cost per order is Rs 50 and the inventory carrying cost is 25% of the value of the average inventory. Find the optimum order quantity and the minimum total cost. If the supplier offers a 5% discount for purchases in lots of 1000, should the offer be accepted?

Example 62(a). A manufacturing firm purchases 2000 units of a particular item per year at a unit cost of Rs 80. The ordering cost per order is Rs 50 and the inventory carrying cost is 25% of the value of the average inventory. Find the optimum order quantity and the minimum total cost. If the supplier offers a 5% discount for purchases in lots of 1000, should the offer be accepted?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter15: Managing Short-term Assets

Section: Chapter Questions

Problem 15PROB

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