Alpha Industries consumes 30,000 units of raw materials annually at the current level of its production. Raw material is currently priced at Rs 65 per unit. The cost of ordering raw materials is Rs 2,500 per order and the carrying cost for Alpha Ltd is 25% of the average value of inventory. With the market facing a recessionary condition the suppliers of the Alpha Ltd have liberalized their credit policy and are offering a discount of 3% on the purchases of raw materials provided the purchases exceed 1,200 units. In the light of the above situation answer the following questions: A. The EOQ of Alpha Ltd without the discount. B. Do you recommend Alpha Ltd to avail the discount offered by their suppliers? C. If Alpha Ltd decides to avail the quantity discount, what will be its EOQ (You are required to estimate the EOQ at different levels of inventory (at least consider 7 levels to justify the EOQ considered in the total of carrying inventory)?
Alpha Industries consumes 30,000 units of raw materials annually at the current level of its production. Raw material is currently priced at Rs 65 per unit. The cost of ordering raw materials is Rs 2,500 per order and the carrying cost for Alpha Ltd is 25% of the average value of inventory. With the market facing a recessionary condition the suppliers of the Alpha Ltd have liberalized their credit policy and are offering a discount of 3% on the
purchases of raw materials provided the purchases exceed 1,200 units. In the light of the above situation answer the following questions:
A. The EOQ of Alpha Ltd without the discount.
B. Do you recommend Alpha Ltd to avail the discount offered by their suppliers?
C. If Alpha Ltd decides to avail the quantity discount, what will be its EOQ (You are required to estimate the EOQ at different levels of inventory (at least consider 7 levels to justify the EOQ considered in the total of carrying inventory)?
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