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 annual purchase costs x Investment percentage Opportunity cost 5% Requirement 2 The opportunity cost would not be recorded in the accounting system due to no actual transaction being recorded in the accounting system. Purchase 264.000 Purchase 22.000 spark plugs at beginning of year spark plugs at beginning of each month Difference Annual purchase-order costs Annual purchase costs Annual interest income that could be earned if investment in inventory were invested Relevant costs The difference column indicates that purchasing 22.000 spark plugs at the beginning of each month is V relative to purchasing 264.000 spark plugs at the beginning of the vear