REVISION QUESTIONS

QUESTION $1$

Montego Bay distributors Limited bakes and distribute buns that are sold for $$360.$ The buns include a mark$-$up of $20\%$ on cost$.$ Each kilogram of baking flour costs $50\%$ of the buns' unit cost. To make the buns the company buys $1,250$ kilograms of baking flour ten $(10)$ times per year.

After subsequent discussion with its suppliers, they were told that quantity discounts are offered on larger order quantities. The supplier provided an analysis on the range of discounts to be offered:

$\backslash$table$[[$Discounts$,$Orders quantities$],[0\%,$Up to $5,000$ kilograms$],[2\mathrm{.}5\%,$At least $7,500$ kilograms$],[5\%,$At least $10,000$ kilograms$],[10\%,$At least $12,500$ kilograms$]]$

Each order is placed by a single individual that charges an average rate of $$50$ per hour. To file the paper works as well as to make the necessary telephone calls to the supplier takes an average six hours. While, the cost of holding each unit of inventory is $20\%$ per annum.

Required

a$.$ Calculate the EOQ and the total cost based on the EOQ

b$.$ Calculate the total cost based on the current policy

c$.$ Determine the optimal order quantity

$[13$ marks $]$

$[4$ marks$]$

$[17$ marks $]$