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Please help!
The annual demand for an item of inventory is 45 units. The item costs $200 a unit to purchase, the
holding cost for 1 unit for 1 year is 15% of the unit cost and ordering costs are $300 an order.
The supplier offers a 3% discount for orders of 60 units or more, and a discount of 5% for orders of 90
units or more.Why discounts applied for 45 units?? In question there are discounts terms for 60 and 90 units.
Thanks in advance!
If they order 60 (or more) units each time then they will get a discount of 3% regardless of how many they order in total over the year. Similarly, if each order is for 90 (or more) they will get a 5% discount however many they order in total during the year.
Here they needing 45 units a year and so it is a strange question that they should consider ordering 60 units each time, but it is possible. I am wondering if you have copied the annual demand figure correctly – if it is a question in the BPP Revision Kit then please tell me which one.
Have you watched my free lectures on this? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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