QUESTION 3 [10 MARKS]

REQUIRED

Use the information provided below to determine the:

3.1 Economic order quantity if discounts are not available (round up EOQ to the nearest whole number) (1 Mark)

3.2 Economic order quantity if discounts are available. (where necessary round off amounts to two decimal places) (9 Marks)

I NFORMATION The following information was provided by Illovo Enterprises for a product that it sells:

Annual demand 120 000

Unit cost R60

Fixed cost per order R20

Annual carrying cost per unit 10% of unit cost

A supplier has offered the following discount scheme for purchases to Illovo:

Discount Order size

0% 0-2 000

3% 2 001-5 000

4% 5 001 +