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A company uses components at the rate of 500 units per month, which are bought at a cost of $1.20 each from the supplier. it costs $20 each time to place an order, regardless of the quantity ordered,
The supplier offers a 5% discount on the purchase price for order quantities of 2000 items or more. The current EOQ is 1000 units.
the total holding cost is 20% per annum of the value of inventory held.
we have to see whether the discount should be accepted or not.This forum is not for requesting full answers to test questions – you must have an answer in the same book in which you found the question, and you should ask about whatever in the answer is not clear to you.
Dealing with quantity discounts is explained in detail in my free lectures (and I cannot simply type out all my lectures here 🙂 )
The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
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