Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(a) Mango Mania's annual demand for mangos, costing $8.00 per kg, is 180,000 kg. Inventory management costs for mangos are as follows: Holding cost:
(a) Mango Mania's annual demand for mangos, costing $8.00 per kg, is 180,000 kg. Inventory management costs for mangos are as follows: Holding cost: Ordering cost: $1.20 per kg per year $50.00 per order It's mango supplier has offered a bulk discount of 3% for orders above 20,000kg. However, this would mean Mango Mania's requiring a bigger storage facility and would increase the annual holding cost to $1.60 per kg. Required: i) Calculate the total cost of inventory for the mangos when using the economic order quantity. Round the EOQ units to the closest whole number. ii) (5 marks) Determine whether accepting the discount offered by the supplier will minimise the total cost of inventory. State the decision to be made. (5 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
i To calculate the Economic Order Quantity EOQ we can use the formula EOQ sqrt2DSH where D Annual de...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started