18. A manufacturing company of microwave ovens uses Rs 75,000 worth of LED readout circuits annually in
Question:
18. A manufacturing company of microwave ovens uses Rs 75,000 worth of LED readout circuits annually in its production process. Cost per order is Rs 45, and the carrying charge assessed against this classification of inventory is 25% of the average balance per year. This company follows an EOQ purchasing system and to date has not been offered by discounts on these circuits. Now the supplier has indicated that if the company would buy its circuits four times a year in equal quantities, a discount of 1.5% off list price would be given in return. Would you advise this company to accept this offer? In order to maintain the present total cost, what should be the minimum discount acceptable to the company if four orders of equal sizes are placed in a year? (CA, November, 1991)
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