Question

2.2 Use the following information to calculate the economic order quantity: INFORMATION Rich Distance Distributors purchases 800 tablets at R2 500 each per annum. The tablets are sold at R3 000 each at a steady rate during the year. The cost of placing a single order amounts to R85. Inventory holding cost amounts to R5 per unit. 2.3 Use the following information to calculate the cost of not accepting a discount: INFORMATION Full-Time Wholesaler's normal credit terms to Rich Distance Distributors are 30 days but is prepared to allow a 4% rebate if Rich Distance Distributors pays the account within 10 days. Calculate the cost to Rich Distance Distributors of not accepting the discount.

Answer 1

2.2. The formula for calculating economic order quantity is given by

, where D= Demand in units (on an annual basis), S = Order cost (per purchase order), H = Holding cost (per unit, per year). In our question, D = 800, S = 85, H = 5.

2DS EOQ = V H

2 * 800 * 85 EOQ=

EOQ = 164.92 $\sim$ 165 units