Powered by Discuz! FOQ Question 2: FLG Co wishes to minimise its inventory costs. The annual demand for a raw material costing 12 per unit is 60,000 units. Inventory management costs for this raw material are as follows: Ordering cost: 6 per order Holding cost: 50 pence per unit annually The supplier of this raw material has offered a bulk purchase discount of 1% for orders of 10,000 units or more. If bulk purchase orders are made regularly, it is expected that annual holding cost for this raw material will increase to 2 per unit per year. Required: Calculate the total cost of inventory for the raw material when using the economic order quantity. (10 marks) Advise whether accepting the discount offered by the supplier will minimise the total cost of inventory for the raw material. (10 marks) Raw material cost = 12, units of rawm = 60,000 units 20D CO- 6 per order. Ch= 60,000 Xa5= 30,000 Note: Economic order quantity "Bulk purchase: 1% for orders of 19000 units or more. holding costs Q. - 10.000. Ch. 30.000 ,Co=f6 pprador, D-60,00D ordering costs = 10. DOUX 30,000 + box buy boo 2