Venus Industries consumes 20,000 units p.a. of a particular component. The supplier has offered the following pricing based on order size: Order Quantity(no of units per order)Cost per unit (Rs)500 - 9991481,000 – 1,9991462,000 – 4,9991435,000 or More142 For each order, the freight + delivery cost incurred is Rs 3,500, and administrative + documentation cost is Rs 500. Venus has estimated the carrying cost of inventory at Rs 50 per unit per annum. What is the best option for Venus to minimize its total cost?

Economic order quantity(EOQ) is the method of ordering the inventory from the suppliers by…

Answered: Venus Industries consumes 20,000 units…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 6E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Venus Industries consumes 20,000 units p.a. of a particular component. The supplier has offered the following pricing based on order size:

Order Quantity (no of units per order)	Cost per unit (Rs)
500 - 999	148
1,000 – 1,999	146
2,000 – 4,999	143
5,000 or More	142

For each order, the freight + delivery cost incurred is Rs 3,500, and administrative + documentation cost is Rs 500. Venus has estimated the carrying cost of inventory at Rs 50 per unit per annum. What is the best option for Venus to minimize its total cost?

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