(a) Mango Mania's annual demand for mangos, costing $8.00 per kg, is 180,000 kg. Inventory management...

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(a) Mango Mania's annual demand for mangos, costing $8.00 per kg, is 180,000 kg. Inventory management costs for mangos are as follows: Holding cost: Ordering cost: $1.20 per kg per year $50.00 per order It's mango supplier has offered a bulk discount of 3% for orders above 20,000kg. However, this would mean Mango Mania's requiring a bigger storage facility and would increase the annual holding cost to $1.60 per kg. Required: i) Calculate the total cost of inventory for the mangos when using the economic order quantity. Round the EOQ units to the closest whole number. ii) (5 marks) Determine whether accepting the discount offered by the supplier will minimise the total cost of inventory. State the decision to be made. (5 marks) (a) Mango Mania's annual demand for mangos, costing $8.00 per kg, is 180,000 kg. Inventory management costs for mangos are as follows: Holding cost: Ordering cost: $1.20 per kg per year $50.00 per order It's mango supplier has offered a bulk discount of 3% for orders above 20,000kg. However, this would mean Mango Mania's requiring a bigger storage facility and would increase the annual holding cost to $1.60 per kg. Required: i) Calculate the total cost of inventory for the mangos when using the economic order quantity. Round the EOQ units to the closest whole number. ii) (5 marks) Determine whether accepting the discount offered by the supplier will minimise the total cost of inventory. State the decision to be made. (5 marks)

Answer rating: 100% (QA)

i To calculate the Economic Order Quantity EOQ we can use the formula EOQ sqrt2DSH where D Annual de... View the full answer