Question: . 2) A FIRM IS CONSIDERING CHANGING HOW IT PLACES ORDERS WITH A SUPPLIER TO TAKE ADVANTAGE OF AVAILABLE QUANTITY DISCOUNTS. THE DETAILS ARE BELOW:
. 2) A FIRM IS CONSIDERING CHANGING HOW IT PLACES ORDERS WITH A SUPPLIER TO TAKE ADVANTAGE OF AVAILABLE QUANTITY DISCOUNTS. THE DETAILS ARE BELOW: 60,000 units (D) are required over the 360-day planning period (D) and are used at a constant daily rate. Payment is due 25 days after order delivered. Inventory pricing (C') if order size is: 0-9,999 $6.00/unit 10,000 - 19,999 $4.90/unit 20,000+ $3.75/unit Ordering Costs (OC) are $100/order. Holding Costs (HC) are $2.15/unit based on average inventory. . Ordering and Holding Costs are paid at end of the production period. The cost of capital is 16%. . . It is considering three options (Q): Current Inventory System - 4,000 units per order Alternative Inventory System 'A' - 10,000 units per order Alternative Inventory System 'B' - 20,000 units per order a. Complete the following chart to determine which inventory system has the lowest Total Cost excluding the cost of capital. Option Inventory Order Size Cost (CD) # Orders (D/O Days Between Ordering Cost Holding Costs Orders (Plaming (OC (DOI (HC * (0/2) Period / Onders Total Cost Existing 'A
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