Question

Brady Jones is a manager at a local store that sells computers. He needs to decide...

Brady Jones is a manager at a local store that sells computers. He needs to decide how many computers to order based on the quantity discount schedule below. Annual demand is 150 computers, annual inventory carrying cost as a percent of unit cost is 18% (due to problems with obsolescence), and ordering costs are $20 per order.

Quantity Price per Unit ($)

1-25

900.00
26-50 895.00
51+ 890.00

What is the Optimal Total Annual Cost?

A. 3

B. 6

C. 26

D. 51

What is the EOQ to purchase?

A. 99

B. 100

C. 399

D. 400

Business   Accounting   
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Answer #1

Answer:-

1) D. 51

Explanation:-

quantity no of orders(A/Q units) cost of purchase ordering cost carrying cost

(annual demand/quantity)    (annual demand * price per tonne) (A/Q*20) (51/2*890*18%)

51 150/51 = 2.94 150*890 = 133500 59 4085

Total cost = purchase cost + ordering cost + carrying cost = 133500 + 59 + 4085 =137645

Note :-

The total cost 150 computers annual demand includes ordering and carrying cost minimum 137645 where the order qty 51+ hence the most economic purchase level is 51

2) D.400

EOQ (Economic order quantity) =(route off) 2AO/i

A= annual demand = 150 computers

O= ordering cost = $20 per order

I=Inventory carrying cost =18%

=(route off) 2*150*20 / 20 * 18%

=(route off) 6000/3.6

=(route off)1666.666

=$40 * 10 =400

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