A firm uses 2,400 units of a product per year on a continuous basis. The product carrying costs are 60 per year and ordering costs are 252.05 per order. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in inventory. (a) Calculate the economic order quantity. (b) Calculate the total cost per year to order and carry this item (c) If it increases its order quantity by 58 units it will get a discount.   i). Calculate the total cost at new level ii). How much is the discount that the supplier will offer  to result in a net benefit to the company

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A firm uses 2,400 units of a product per year on a continuous basis. The product carrying costs are 60 per year and ordering costs are 252.05 per order. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in inventory.

(a) Calculate the economic order quantity.

(b) Calculate the total cost per year to order and carry this item

(c) If it increases its order quantity by 58 units it will get a discount.

  i). Calculate the total cost at new level

ii). How much is the discount that the supplier will offer  to result in a net benefit to the company

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