A city bar has an annual demand of 9000 boxes , which it purchases at a...
A city bar has an annual demand of 9000 boxes , which it purchases at a price of 60 $ per box. The annual carrying cost is 8 $ and the cost per order is 160. The distribution has offered the bar a reduced price of 56$ per box if it orders a quantity of 300.
Should the bar take the discount ?
kindly solve by a typing
Homework Answers
| EOQ = √((2x Annual demand x ordering cost)/ carrying cost per unit | ||
| EOQ = √((2x 9000 x 160)/ $8 | ||
| EOQ = 600 boxes | ||
| Annual cost at EOQ -600 boxes | ||
| Annual Carrying cost | (600/2)x8 | 2400 |
| Ordering cost | (9000/600)*160 | 2400 |
| Annual cost at EOQ | 4800 | |
| Annual cost at discount offer quantity (300 boxes) | ||
| Annual Carrying cost | (300/2)x8 | 1200 |
| Ordering cost | (9000/300)*160 | 4800 |
| Annual cost at EOQ | 6000 | |
| Increase in Annual cost | 1200 | |
| Saving on price reduction | (9000x (60-56)) | 36000 |
| Net savings | 34800 | |
| City bar should take the discount | ||
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