Question
Problem 1 (8 pts) A retailer sells approximately 10,000 units of a cereal bar per year, which is high in comparison to other similar
Problem 1 (8 pts) A retailer sells approximately 10,000 units of a cereal bar per year, which is high in comparison to other similar products. With this fact in mind, the retailer negotiated the following purchase cost per unit with the wholesale to reduce inventory costs: Order Quantity 0-2500 2501-7500 7501-20000 Wholesaler Price Per Unit $5.00 $4.50 $4.00 The holding costs account for 25% of each unit's price, and placing an order costs $12 to the company. In the old contract, the company was paying $4.75 per cereal bar unit. Is this new contract worth it?
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Management Accounting
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
6th Canadian edition
013257084X, 1846589207, 978-0132570848
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