6-1 MyAccountingLab Homework: Chapter 11 Question 3, E11-26 (similar to) HW Score: 29.40%, 13.26 of 45 points Points: 0.43 of 5 Save Lawnox, a manufacturer of lawn mowers, predicts that it will purchase 276.000 spark plugs next year. Lawnox estimates that 23.000 spark plugs will be required each month. A suppler quotes a price of $5.00 per spark plug The supplier also offers a special discount option If all 276.000 spark plugs are purchased at the start of the year, a discount of 2% off the $900 price will be given Laanox can invest its cash at 10% per year. It costs Lawnox $200 to place each purchase order Read the requirements Requirement 1. What is the opportunity cost of interest forgone from purchasing all 276,000 units at the start of the year instead of in 12 monthly purchases of 23,000 units per order? Let's begin the calculation for the opportunity cost of interest forgone by first determining the formula, then calculate the opportunity cost Difference in average investment Investment percentage 10% Opportunity cost Requirements 1. What is the opportunity cost of interest forgone from purchasing all 276,000 units at the start of the year instead of in 12 monthly purchases of 23,000 units per order? 2. Would this opportunity cost be recorded in the accounting system? Why? 3. Should Lawnox purchase 276,000 units at the start of the year or 23,000 units each month? Show your calculations. 4. What other factors should Lawnox consider when making its decision? - X der