A. Ltd buys 400 units of an item at a purchase cost Sh.5000 per unit and ordering cost of Sh.2,000 per order placed. The carrying cost is estimated at 24% of cost of an item p.a. The Co. has received a 2% discount offer for purchases of 100 or more units. Required: a) Determine the best inventory policy for this item. b) Determine the discount level at which the firm will be indifferent between taking and not taking the discount offer.

A. Ltd buys 400 units of an item at a purchase cost Sh.5000 per unit and ordering cost of Sh.2,000 per order placed. The carrying cost is estimated at 24% of cost of an item p.a. The Co. has received a 2% discount offer for purchases of 100 or more units. Required: a) Determine the best inventory policy for this item. b) Determine the discount level at which the firm will be indifferent between taking and not taking the discount offer.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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