Question
Halwings Group Limited wishes to achieve excellent stock management so as to achieve a marvelous profit this year. Its management estimates the demand for its
Halwings Group Limited wishes to achieve excellent stock management so as to achieve a marvelous profit this year. Its management estimates the demand for its products to be 1000 units per annum, with a purchase price of shs.10 per unit, a holding cost of shs.0.75 per unit and ordering cot of shs.15 per order. The supplier of the stocks has presented Halwings Group Limited with the following range of prices of the stocks: Quantity Price Per Order size (in units) Discount Unit (Shs) (%) 0 99 0 10 100 199 1 9.90 200 399 2 9.80 400 599 4 9.60 600 799 5 9.50 800 899 5 9.50 900 999 5.5 9.45 Due to its storage capacity, the company can only purchase an amount of up to 600 units. Currently, the company is purchasing at optimum stock quantity to enable it achieve its objectives. The management is considering whether to shift from the current stock purchase policy to purchase the maximum stocks. Required. a) Calculate the current EOQ in units. (5 Marks) b) Determine the total costs of stocks that arise due to the EOQ purchased (include the discount opportunity costs). (5 Marks) c) Advise the company whether it should change its policy. (5 Marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started