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on WinCo Inc. purchases 11,250 litres of a material each year from a single supplier. Currently, the company obtains materials in batches of 2,250
on WinCo Inc. purchases 11,250 litres of a material each year from a single supplier. Currently, the company obtains materials in batches of 2,250 litres. The material costs $7.50 per litre, the cost of ordering a new batch from the supplier is $4 per hour. It takes 4 hours to place an order. The cost of holding one litre in stock is $0.69 per annum plus an interest cost equal to 10% of the purchase price of the material. The supplier has agreed to offer a discount on orders above a certain size. He has offered the following price structure: Order size (litres) Unit cost 0-1,249 $7.50 1,250-2,499 $7.10 2,500 and above $6.90 Required: (a) Prior to considering discounts, calculate the: (i) Economic order quantity. (3 marks)
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