Superior Lawn, a manufacturer of lawn mowers, predicts that it will purchase 336,000 spark plugs next...

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Superior Lawn, a manufacturer of lawn mowers, predicts that it will purchase 336,000 spark plugs next year. Superior Lawn estimates that 28,000 spark plugs will be required each month. A supplier quotes a price of $13 per spark plug. The supplier also offers a special discount option: If all 336,000 spark plugs are purchased at the start of the year, a discount of 3% off the $13 price will be given. Superior Lawn can invest its cash at 6% per year. It costs Superior Lawn $145 to place each purchase order. Required 1. What is the opportunity cost of interest forgone from purchasing all 336,000 units at the start of the year instead of in 12 monthly purchases of 28,000 units per order? 2. Would this opportunity cost be recorded in the accounting system? Why? 3. Should Superior Lawn purchase 336,000 units at the start of the year or 28,000 units each month? Show your calculations. Requirement 1. What is the opportunity cost of interest forgone from purchasing all 336,000 units at the start of the year instead of in 12 monthly purchases of 28,000 units per order? Let's begin the calculation for the opportunity cost of interest forgone by first determining the formula. Then, calculate the opportunity cost. Difference in average investment x Investment percentage Opportunity cost X Superior Lawn, a manufacturer of lawn mowers, predicts that it will purchase 336,000 spark plugs next year. Superior Lawn estimates that 28,000 spark plugs will be required each month. A supplier quotes a price of $13 per spark plug. The supplier also offers a special discount option: If all 336,000 spark plugs are purchased at the start of the year, a discount of 3% off the $13 price will be given. Superior Lawn can invest its cash at 6% per year. It costs Superior Lawn $145 to place each purchase order. Required 1. What is the opportunity cost of interest forgone from purchasing all 336,000 units at the start of the year instead of in 12 monthly purchases of 28,000 units per order? 2. Would this opportunity cost be recorded in the accounting system? Why? 3. Should Superior Lawn purchase 336,000 units at the start of the year or 28,000 units each month? Show your calculations. Requirement 1. What is the opportunity cost of interest forgone from purchasing all 336,000 units at the start of the year instead of in 12 monthly purchases of 28,000 units per order? Let's begin the calculation for the opportunity cost of interest forgone by first determining the formula. Then, calculate the opportunity cost. Difference in average investment x Investment percentage Opportunity cost X

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