Question: Point uses the economic order quantity (EOQ) model to establish the reorder quantity for raw material Y. The company holds no buffer inventory. Information relating

Point uses the economic order quantity (EOQ) model to establish the reorder quantity for raw material Y. The company holds no buffer inventory. Information relating to raw material Y is as follows:

Annual usage 48,000 units

Purchase price $80 per unit

Ordering costs $120 per order

Annual holding costs 10% of the purchase price

Required: Calculate

a.The EOQ for raw material Y is

b.The total annual cost of purchasing, ordering and holding inventory of raw material Y is:

c.The supplier has offered Point a discount of 1% on the purchase price if each order placed is for 2,000 units.

Calculate the total annual saving to Point of accepting this offer.

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