Question 4 (30 Marks)

Marantz Inc. produces various AV devices with a wide assortment of different models for its customers. One item, AV3100 is very popular. Keen of keeping its stock under control, a decision is taken to order only the optimum economic quantity, for this item, each time. You have the following information.

Annual demand (units)	48,600
Purchase price per unit	$ 250
Carrying/Holding costs per unit	$ 6
Cost per order	$ 200

Required:

1. Determine the EOQ using the equation method. (6 marks)

1. Fill in the blanks in the following table using the above data. (8 marks)

No. of orders	1	10	20	30	90	120
Order size
Average stock
Carrying (Holding) costs
Order costs
Total costs

1. Calculate the holding, ordering cost & their total cost at the EOQ level. (5 marks)
2. Plot the graph at the EOQ level showing the numbers (2 marks).
3. Marantz Inc. has been offered a 3 per cent discount on the cost if it places orders in quantities of 18,200. Discuss whether the company should accept the discount and place larger orders, show your workings. (9 marks)