Question

10. Suppose Stanley's Office Supply purchases 50,000 boxes of pens every year. Ordering costs are $100...

10. Suppose Stanley's Office Supply purchases 50,000 boxes of pens every year. Ordering costs are $100 per order, carrying costs are 5% of the inventory value, and the price is of $2.00 per box. The vendor now offers a quantity discount of 1% per box if the company buys pens in order sizes of 20,000 boxes. Should the company accept the quantity discount? Show your calculations to justify your decision.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
EOQ = √((2x Annual demand x ordering cost)/ carrying cost per unit
EOQ = √((2x 50000 x 100)/ ($2*5%)
EOQ = 10,000 boxes
Annual cost at EOQ -10,000 boxes
Annual Carrying cost (10000/2)x$0.1 500
Ordering cost (50000/10000)*100 500
Annual cost at EOQ 1000
Annual cost at discount offer quantity (20,000 boxes)
Annual Carrying cost (20000/2)x$0.1 1000
Ordering cost (50,000/20,000)*100 250
Annual cost at EOQ 1250
Increase in Annual cost 250
Saving on price reduction (50,000x $2.00 X1%) 1000
Net savings 750
Company should accept the quantiy discount
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose Stanley's Office Supply purchases 50,000 boxes of pens every year. Ordering costs are $100 per...
Suppose Stanley's Office Supply purchases 50,000 boxes of pens every year. Ordering costs are $100 per order, carrying costs are 5% of the inventory value, and the price is of $2.00 per box. The vendor now offers a quantity discount of 1% per box if the company buys pens in order sizes of 20,000 boxes. Should the company accept the quantity discount? Show your calculations to justify your decision.
Suppose Stanley's Office Supply purchases 90,000 boxes of pens every year. Ordering costs are $133.95 per...
Suppose Stanley's Office Supply purchases 90,000 boxes of pens every year. Ordering costs are $133.95 per order and carrying costs are $0.75 per box. Moreover, management has determined that the EOQ is 5,669.92 boxes. Note: The ordering costs and EOQ differ from problem 1. The vendor now offers a quantity discount of $0.02 per box if the company buys pens in order sizes of 10,000 boxes. Determine the before-tax benefit or loss of accepting the quantity discount. (Assume the carrying...
Part A Suppose Big Box Office Supply (BBOS) purchases 100,000 office chairs every year. Ordering costs...
Part A Suppose Big Box Office Supply (BBOS) purchases 100,000 office chairs every year. Ordering costs are $95.00 per order and carrying costs are $5.25 per chair. a) What is BBOS’s total inventory cost per year, including both carrying costs and ordering costs, if BBOS orders the EOQ of office chairs? Part B Using the same data as Part A, Big Box Office Supply (BBOS) is able to negotiate a reduction in the carrying costs to $3.50 per chair, but...
Using the data from problem 13, Big Box Office Supply (BBOS) is able to negotiate a...
Using the data from problem 13, Big Box Office Supply (BBOS) is able to negotiate a reduction in the carrying costs to $3.50 per chair, but BBOS’s chair supplier offers a quantity discount of $0.25 per chair if BBOS orders 5,000 chairs at a time rather than the EOQ. Determine the before–tax benefit or loss of accepting the quantity discount. (Assume the carrying cost remains at $3.50 per chair whether or not the discount is taken.) Data from # 13...
The office manager for the Gotham Life Insurance Company orders letterhead stationery from an office products...
The office manager for the Gotham Life Insurance Company orders letterhead stationery from an office products firm in boxes of 500 sheets. The company uses 6,500 boxes per year. Annual carrying costs are $3 per box, and ordering costs are $28. The following discount price schedule is provided by the office supply company: Order Quantity (in boxes) Price per Box 200-999 $16 1000-2999 14 3000-5999 13 6000+ 12 a. Determine the optimal order quantity and the total annual inventory cost....
13-29. The office manager for the Metro Life Insurance Company orders letterhead stationery from an office...
13-29. The office manager for the Metro Life Insurance Company orders letterhead stationery from an office product firm in boxes of 500 sheets. The company uses 6500 boxes per year. Annual carrying costs are $3 per box, and ordering costs are $28. The following discount price schedule is provided by the office supply company: Order Quantity (boxes) Price per Box 200–999 $16 1000–2999 14 3000–5999 13 6000+ 12 A. Determine the optimal order quantity and the total annual inventory cost....
Millbridge Hospital buys 10,000 boxes of latex gloves every year. Each box costs the hospital $7....
Millbridge Hospital buys 10,000 boxes of latex gloves every year. Each box costs the hospital $7. The cost to place an order for the gloves—which covers the employee staff time, shipping costs, the hospital’s receiving center for inventorying, for example—is estimated at $50 per order. Carrying costs (for storing the boxes, verifying the inventory periodically, etc.) are estimated at 50 cents per box per year. Millbridge uses a 6 percent interest-cost assumption in its calculations. How many boxes should be...
Cheeseburger and Taco Company purchases 10,570 boxes of cheese each year. It costs $20 to place...
Cheeseburger and Taco Company purchases 10,570 boxes of cheese each year. It costs $20 to place and ship each order and $8.89 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is the annual ordering cost of cheese inventory. Round the answer to two decimals.
A mail-order house uses 15,750 boxes a year. Carrying costs are 45 cents per box a...
A mail-order house uses 15,750 boxes a year. Carrying costs are 45 cents per box a year, and ordering costs are $92. The following price schedule applies. Number of Boxes Price per Box 1,000 to 1,999 $1.40 2,000 to 4,999 1.30 5,000 to 9,999 1.20 10,000 or more 1.15 Determine the optimal order quantity. (Round your answer to the nearest whole number.)    Optimal order quantity             boxes b. Determine the number of orders per year. (Round your answer to...
A large law firm uses an average of 50 boxes of copier paper a day. The...
A large law firm uses an average of 50 boxes of copier paper a day. The firm operates 260 days a year. Storage and handling costs for the paper are $40 a year per box, and it costs approximately $70 to order and receive a shipment of paper. a. What order size would minimize the sum of annual ordering and carrying costs? b. Compute the total annual cost using your order size from part a c. Except for rounding, are...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT