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Global Lawn, a manufacturer of lawn mowers, predicts that it will purchase 216,000 spark plugs next year. Global Lawn estimates that 18,000 spark plugs will
Global Lawn, a manufacturer of lawn mowers, predicts that it will purchase 216,000 spark plugs next year. Global Lawn estimates that 18,000 spark plugs will be required each month. A supplier quotes a price of $8.00 per spark plug. The supplier also offers a special discount option: If all 216,000 spark plugs are purchased at the start of the year, a discount of 4% off the $8.00 price will be given. Global Lawn can invest its cash at 10% per year. It costs Global Lawn $230 to place each purchase order. Read the requirements. Requirement 1. What is the opportunity cost of interest forgone from purchasing all 216,000 units at the start of the year instead of in 12 monthly purchases of 18, 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. Opportunity cost Edit Table Cancel Requirements e: nex ba stes ar. oric ark en 1. What is the opportunity cost of interest forgone from purchasing all 216,000 units at the start of the year instead of in 12 monthly purchases of 18,000 units per order? ise obc der ead the Eegu tart 2 Would this opportunity cost be recorded in the accounting system? Why? then Let's calcu st Should Global Lawn purchase 216,000 units at the start of 3. the year or 18,000 units each month? Show your calculations. D 4. What other factors should Global Lawn consider when making its decision
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