A hockey equipment business, estimates that it will sell 3 400 pairs of shin pads per year from a distributor in Spain. Each pair costs R 195.00 to purchase and R18.00 in freight charges. The company borrows funds at an interest rate of 9% per annum to finance inventories. The purchasing agent has calculated that it costs R 472.00 to place an order for each pair of shin pads and that the holding cost is R 6.00 for each pair. 1. Determine the order-size decision the company should make if the Spain distributor offers a 12.00% discount off the purchase cost excluding the delivery price for minimum orders of 1 428 pairs of shin pads. (For all the costs that make up the total costs round off to two decimal points, as well as the final answer) 2. Assuming sales are uniform throughout the year (365 days) and the lead time is 10 days; determine the reorder point at the EOQ level. (Round off your answer to the nearest whole unit) 3. What is the financial consequence if only 6 orders are placed for the year instead of ordering at the EOQ level? (For all the costs that make up the total costs round off to two decimal points, as well as the final answer)
A hockey equipment business, estimates that it will sell 3 400 pairs of shin pads per year from a distributor in Spain. Each pair costs R 195.00 to purchase and R18.00 in freight charges. The company borrows funds at an interest rate of 9% per annum to finance inventories. The purchasing agent has calculated that it costs R 472.00 to place an order for each pair of shin pads and that the holding cost is R 6.00 for each pair.
1. Determine the order-size decision the company should make if the Spain distributor offers a 12.00% discount off the purchase cost excluding the delivery price for minimum orders of 1 428 pairs of shin pads. (For all the costs that make up the total costs round off to two decimal points, as well as the final answer)
2. Assuming sales are uniform throughout the year (365 days) and the lead time is 10 days; determine the reorder point at the EOQ level. (Round off your answer to the nearest whole unit)
3. What is the financial consequence if only 6 orders are placed for the year instead of ordering at the EOQ level? (For all the costs that make up the total costs round off to two decimal points, as well as the final answer)
Step by step
Solved in 2 steps with 6 images
