Mr john, have watched your free lectures on inventory control
The annual demand for an item of inventory is 45 units. The item costs $200 a unit to purchase, the holding cost for one unit for one year is 15% of the unit of cost and ordering costs are $300 and order.
The supplier offers am 3% discount for orders of 60 units or more, and a discount of 5% for orders of 90 units or more.
Calculate the cost- minimising order size.
my question is, how come the discount is only accounted for in holding costs and not in ordering costs too.
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intrest charge
9y ago#1But why would it affect the cost of ordering?
The discount means that the purchase price is lower. Since the holding cost is a % of the purchase price, then since the purchase price is lower the holding cost is lower as well.
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