Question
Calcit Ltd would normally rent a lock-up store to hold its stock of calculators. Annual demand is estimated at 200,000 calculators. Purchase price per calculator
Calcit Ltd would normally rent a lock-up store to hold its stock of calculators. Annual demand is estimated at 200,000 calculators. Purchase price per calculator is 0.40 in quote 1 (minimum order 20,000 calculators) and 0.45 per calculator in quote 2. Each order has an administration cost of 300, and the storage facility would work out at 1.65 per year for each calculator held in storage. Calcit Ltd has calculated the Economic Order Quantity at 8,528 calculators. Calculate total inventory costs under each quote and advise Calcit Ltd as to which quote they should accept.
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