A company uses 8,000 units of a product as raw material, costing Rs 10 per unit. The
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A company uses 8,000 units of a product as raw material, costing Rs 10 per unit. The administrative cost per purchase is Rs 40. The holding costs are 28% of the average inventory. The company is following an optimal purchase policy and places orders according to the EOQ. It has been offered a quantity discount of one per cent if it purchases its entire requirement only four times a year.
Should the company accept the offer of quantity discount of one per cent? If not, what minimum discount should the company demand?
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