Grass Eaters, a manufacturer of lawn mowers, predicts that it will purchase 264,000 spark plugs next year. Grass Eaters estimates that 22,000 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 264,000 spark plugs are purchased at the start of the year, a discount of 5% off the $8.00 price will be given. Grass Eaters can invest its cash at 10% per year. It costs Grass Eaters $230 to place each purchase order. Requirements 1. What is the opportunity cost of interest forgone from purchasing all 264,000 units at the start of the year instead of in 12 monthly purchases of 22,000 units per order? 2. Would this opportunity cost be recorded in the accounting system? Why? 3. Should Grass Eaters purchase 264,000 units at the start of the year or 22,000 units each month? Show your calculations. Requirement 1 Let's begin the calculation for the opportunity cost of interest forgone by first determining the formula, then calculating the opportunity cost. Difference in average investment X Investment percentage x 10% Opportunity cost Requirement 2 The opportunity cost would not be recorded in the accounting system due to no actual transaction being recorded in the accounting system Requirement 3 Begin by calculating the relevant costs for each alternative; then calculate the difference between the two alternatives.