To determine the effect of various discount levels, prepare the headings in columns C,D, and E as shown. Copy everything from column B to Columns C,D, and E. Change the cost per item in columns C,D, and E to reflect discounted cost of each item, i.e. 8.98,8.95 and 8.90. Enter minimum required Q to be 400,800 , and 1600 in columns C, D, and E. The spreadsheet shows the results. The best decision for American Technology Corporation is to accept a 5% discount and order 800 units each time from the vendor. This will save $330 per year from current costs. The last spreadsheet shows the effect of reducing the holding cost rate to .22 or 22%. Simply change the holding cost rate and the new solution appears as shown. American Technology Corporation can save $487.80 per year by implementing both options and taking advantage of the 10% discount and ordering once a year. 1. Suppose that a company buys about $81,000 worth of items from a vendor each year. If ordering cost is $25 per order and holding cost rate is 20%, how many dollars worth of items should be bought in each order? (Hint: Assume one dollar = one unit). 2. The vendor in the above problem will offer you a 2% discount if you buy at least $9,000 of items in each order. Should you accept this offer? If no, what is a fair counter offer? Research Problem Suppose that American Technology Corporation can allow shortages for the product used in the business case, at a cost of $4 per unit per year. Construct a new spreadsheet model. To determine the effect of various discount levels, prepare the headings in columns C,D, and E as shown. Copy everything from column B to Columns C,D, and E. Change the cost per item in columns C,D, and E to reflect discounted cost of each item, i.e. 8.98,8.95 and 8.90. Enter minimum required Q to be 400,800 , and 1600 in columns C, D, and E. The spreadsheet shows the results. The best decision for American Technology Corporation is to accept a 5% discount and order 800 units each time from the vendor. This will save $330 per year from current costs. The last spreadsheet shows the effect of reducing the holding cost rate to .22 or 22%. Simply change the holding cost rate and the new solution appears as shown. American Technology Corporation can save $487.80 per year by implementing both options and taking advantage of the 10% discount and ordering once a year. 1. Suppose that a company buys about $81,000 worth of items from a vendor each year. If ordering cost is $25 per order and holding cost rate is 20%, how many dollars worth of items should be bought in each order? (Hint: Assume one dollar = one unit). 2. The vendor in the above problem will offer you a 2% discount if you buy at least $9,000 of items in each order. Should you accept this offer? If no, what is a fair counter offer? Research Problem Suppose that American Technology Corporation can allow shortages for the product used in the business case, at a cost of $4 per unit per year. Construct a new spreadsheet model
