Question
a) Bara enterprises operates in Kitale town. On annual basis, it orders 480,000 pens form a Nairobi based distributor. A packet of 24 pens delivered
- a) Bara enterprises operates in Kitale town. On annual basis, it orders 480,000 pens form a Nairobi based distributor. A packet of 24 pens delivered to Baras warehouse cost sh 480 including transport charges. The supermarket barrows money from ABC bank of an interest rate of 10% p.a to finance its inventories. The supermarket also incurs sh 1,500 to place an order for the pens and sh 8 carrying cost for each pen
REQUIRED:
- Calculate the economic order quantity (EOQ) for the pens
- Total cost of the EOQ
- For orders for 72,000 pens and above the distributer has offered a discount rate of 10% on delivery price.
Advice the management of the supermarket on whether to take advantages of the discount offer.
b) Wilson an automotive technician has been operating a garage in Mombasa for the past two years. A year ago he converted part of his garage to a welding shop making and selling metal doors and windows. He had anticipated that he cost of welding shop would primarily be final but has realized that the welding cost increased with the increase in number of welding job assignment. The costs of welding job assignments are as follows.
Perched | No of welding job assignments | Total cost sh 000 |
Sept 2008 | 280 | 700 |
Oct 2008 | 800 | 860 |
Nov 2008 | 1,240 | 110 |
Dec 2008 | 1,000 | 960 |
Jan 2009 | 600 | 720 |
Feb 2009 | 920 | 910 |
Mar 2009 | 860 | 880 |
Apr 2009 | 1,200 | 260 |
REQUIRED:
Formulate an equation to estimate the total cost of the welding shop and compute the cost of undertakings 1256 assignment using
- High-low method
- Simple linear regression method. (6 Marks)
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