B Com Exam > B Com Questions > Annual demand for a particular item of invent...
Start Learning for Free
Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer?
Most Upvoted Answer
Annual demand for a particular item of inventory is 2,50,000 units. In...
Solution:
Given data:
Annual demand = 2,50,000 units
Inventory carrying cost per unit per year = 20%
Ordering cost = Rs. 40 per order
Price quoted by supplier = Rs. 4 per unit
Discount offered by supplier = 5%
Discount eligibility = orders of 7500 units or more
Calculation of Annual inventory carrying cost:
Annual inventory carrying cost = Average inventory level x Inventory carrying cost per unit per year
Average inventory level = (Q/2) where Q is the economic order quantity
Economic order quantity = sqrt(2DS/H) where D is the annual demand, S is the ordering cost per order and H is the inventory carrying cost per unit per year
Substituting the given values, we get:
Economic order quantity = sqrt(2 x 2,50,000 x 40/0.2) = 10,000 units
Average inventory level = 10,000/2 = 5,000 units
Annual inventory carrying cost = 5,000 x 4 x 20% = Rs. 4,000
Calculation of Total cost without discount:
Total cost without discount = (Annual demand/Q) x S + (Q/2) x H + (Annual demand x P)
where P is the price per unit quoted by the supplier
Substituting the given values, we get:
Q = Economic order quantity = 10,000 units
Total cost without discount = (2,50,000/10,000) x 40 + (10,000/2) x 20% + (2,50,000 x 4) = Rs. 1,00,000 + Rs. 10,000 + Rs. 10,00,000 = Rs. 11,10,000
Calculation of Total cost with discount:
If we avail the discount offer, then the price per unit will be Rs. 3.80
Total cost with discount = (Annual demand/Q) x S + (Q/2) x H + (Annual demand x P')
where P' is the discounted price per unit
Substituting the given values, we get:
Q = 7500 units (as the discount eligibility is for orders of 7500 units or more)
Total cost with discount = (2,50,000/7500) x 40 + (7500/2) x 20% + (2,50,000 x 3.80) = Rs. 10,667 + Rs. 1,500 + Rs. 9,50,000 = Rs. 9,62,167
Decision:
Total cost without discount = Rs. 11,10,000
Total cost with discount = Rs. 9,62,167
Savings = Rs. 1,47,833
As we can see, availing the discount offer will result in a significant cost savings of Rs. 1,47,833. Therefore, it is worthwhile to avail the discount offer.
Conclusion:
Availing the discount offer will result in a significant cost savings of Rs. 1,47,833. Therefore, it is recommended to avail the discount offer.
Given data:
Annual demand = 2,50,000 units
Inventory carrying cost per unit per year = 20%
Ordering cost = Rs. 40 per order
Price quoted by supplier = Rs. 4 per unit
Discount offered by supplier = 5%
Discount eligibility = orders of 7500 units or more
Calculation of Annual inventory carrying cost:
Annual inventory carrying cost = Average inventory level x Inventory carrying cost per unit per year
Average inventory level = (Q/2) where Q is the economic order quantity
Economic order quantity = sqrt(2DS/H) where D is the annual demand, S is the ordering cost per order and H is the inventory carrying cost per unit per year
Substituting the given values, we get:
Economic order quantity = sqrt(2 x 2,50,000 x 40/0.2) = 10,000 units
Average inventory level = 10,000/2 = 5,000 units
Annual inventory carrying cost = 5,000 x 4 x 20% = Rs. 4,000
Calculation of Total cost without discount:
Total cost without discount = (Annual demand/Q) x S + (Q/2) x H + (Annual demand x P)
where P is the price per unit quoted by the supplier
Substituting the given values, we get:
Q = Economic order quantity = 10,000 units
Total cost without discount = (2,50,000/10,000) x 40 + (10,000/2) x 20% + (2,50,000 x 4) = Rs. 1,00,000 + Rs. 10,000 + Rs. 10,00,000 = Rs. 11,10,000
Calculation of Total cost with discount:
If we avail the discount offer, then the price per unit will be Rs. 3.80
Total cost with discount = (Annual demand/Q) x S + (Q/2) x H + (Annual demand x P')
where P' is the discounted price per unit
Substituting the given values, we get:
Q = 7500 units (as the discount eligibility is for orders of 7500 units or more)
Total cost with discount = (2,50,000/7500) x 40 + (7500/2) x 20% + (2,50,000 x 3.80) = Rs. 10,667 + Rs. 1,500 + Rs. 9,50,000 = Rs. 9,62,167
Decision:
Total cost without discount = Rs. 11,10,000
Total cost with discount = Rs. 9,62,167
Savings = Rs. 1,47,833
As we can see, availing the discount offer will result in a significant cost savings of Rs. 1,47,833. Therefore, it is worthwhile to avail the discount offer.
Conclusion:
Availing the discount offer will result in a significant cost savings of Rs. 1,47,833. Therefore, it is recommended to avail the discount offer.
Community Answer
Annual demand for a particular item of inventory is 2,50,000 units. In...
Total cost without discount 1004000
|
Explore Courses for B Com exam
|
|
Similar B Com Doubts
Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer?
Question Description
Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer?.
Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer?.
Solutions for Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? in English & in Hindi are available as part of our courses for B Com.
Download more important topics, notes, lectures and mock test series for B Com Exam by signing up for free.
Here you can find the meaning of Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? defined & explained in the simplest way possible. Besides giving the explanation of
Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer?, a detailed solution for Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? has been provided alongside types of Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? theory, EduRev gives you an
ample number of questions to practice Annual demand for a particular item of inventory is 2,50,000 units. Inventory carrying cost per unit per year is 20% and ordering cost is rs40 per order. The price quoted by the supplier is rs4 per unit. However, the supplier willing to give discount of 5% for orders of 7500 units or more. Is it worthwhile to avail of discount offer? tests, examples and also practice B Com tests.
|
|
Explore Courses for B Com exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup