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While considering the discount factor why we include this in the holding cost as well? Like in a question
Purchase price-25
Annual demand-1800
Ordering cost-32
Annual holding cost-4.50 per unit
Q-160
What is the minimum total cost assuming a discount of 2%given on orders of 300 and over? In the answer they take 0.98*4.50 while calculating holding cost.but I could not understand why the discount need to add with holding cost?If the holding cost is given as 18% of purchase price, then if the purchase price falls (because of the discount) then so too does the holding cost.
On the other hand, if the holding cost was given as a fixed $4.50, then it is not affected by the discount.Why do you not watch the free lecture, where all of this is explained?!
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