Question: 2 . 2 . Suppose Pick n Pay sells 2 5 0 0 0 0 0 units annually of a popular product within its Namibian
Suppose Pick n Pay sells units annually of a popular product within its Namibian operations. The cost to place, process, and receive an order from the supplier is R per order, and the cost to carry each unit of the product in the distribution center is R per year. The acquisition cost of the product from the supplier is R per unit. Assume these costs remain constant throughout the year.
Calculate the economic order quantity EOQ for the product.
Based on the EOQ model, calculate the total annual ordering cost and the total annual carrying cost for the product.
A prospective supplier has proposed supplying units of the product at the beginning of each quarter at a cash discount. Accepting this proposal would increase the annual carrying cost per unit to R due to the need to expand the distribution centers capacity. The cost to place, process, and receive an order will remain R per order. Should Pick n Pay Namibia accept this proposal? Justify your decision by showing all relevant calculations.
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