A supplier has offered your company a reduced price per unit for a component part you purchase

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A supplier has offered your company a reduced price per unit for a component part you purchase if you will increase your purchase quantity from 20,000 to 40,000 units. Currently, you pay $30 per unit. The supplier has offered to reduce this cost to $28 per unit if you purchase the higher quantity. You purchase approximately 200,000 of the units annually. The cost to place an order is estimated to be $200 per order regardless of the order size. Transportation costs are estimated to be $0.20 per unit. Your cost to hold a component part in inventory is estimated at 20% annually based on the cost of the purchased item. Should you continue with your current policy, or should you take the incentive offered by the supplier?
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Managing Supply Chain and Operations An Integrative Approach

ISBN: 978-0132832403

1st edition

Authors: Thomas Foster, Scott E. Sampson, Cynthia Wallin, Scott W Webb

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