Accounting

Problem 1.4 (EOQ with discount). JP Limited manufacturers of a special product, follows the policy of EOQ (Economic Order Quantity) for one of its components. The component's details are as follows: Purchase Price Per Component Rs. 200 Cost of an order 100 Annual Cost of Carrying one Unit in Inventory 10% of Purchase Price Total Cost of Inventory and Ordering Per Annum 4,000 The company has been offered a discount of 2% on the price of the component provided the lot size is 2,000 components at a time. You are required to :(a) Compute the EOQ (b) Advise whether the quantity discount offer can be accepted (Assume that the inventory carrying cost does not vary according to the discount policy) (c)Would your advice differ if the company is offered 5% discount on a single order