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Forums › Ask CIMA Tutor Forums › Ask CIMA F1 Tutor Forums › Receivables, payables and inventory
Create Co requires 20,000 units of a certain component every year. The purchase price per unit is $40 and it costs $64 to place and receive delivery of an order irrespective of its size. Create co’s cost of capital is 10% per annum.Creat co currently places orders for 800 units, although a discount scheme for larger orders exist which works as follows
Minimum order quantity Discount rate
1000 1%
4000 2%
8000 3%
What size of order should create co place if its aim is to minimize costs?
800 units
1000 units
4000 units
8000 units
Please can you help me with the steps needed for this ?
Hi,
You need to use the economic order quantity formula. Try it and see where you get to.
Thanks