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A manufacturing company uses rs.50000 material per year,ordering cost per purchase is rs 50 and carrying cost is 20%,cost per unit of material is 20 rs .The company currently has optimum purchase policy .The supplier offer .04% discount,if the company purchase 5 times in a year .Should the offer be accepted ? If not what counter offer should be made ?
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A manufacturing company uses rs.50000 material per year,ordering cost ...
Analysis of the Current Situation


  • Material Cost: Rs.50,000 per year

  • Ordering Cost: Rs.50

  • Carrying Cost: 20%

  • Cost per unit of material: Rs.20

  • Optimum Purchase Policy



Calculation of Annual Ordering Cost


  • Annual Demand = 50,000 / 20 = 2,500 units

  • Number of Orders = Annual Demand / Optimum Order Quantity

  • Optimum Order Quantity = sqrt((2 x 50,000 x 50) / (20% x 20)) = 500 units

  • Number of Orders = 2,500 / 500 = 5 orders

  • Annual Ordering Cost = Number of Orders x Ordering Cost = 5 x 50 = Rs.250



Calculation of Annual Carrying Cost


  • Optimum Order Quantity / 2 = 250 units

  • Annual Carrying Cost = 250 x 20% x 20 = Rs.1,000



Calculation of Current Total Cost


  • Current Total Cost = Annual Ordering Cost + Annual Carrying Cost + Annual Material Cost

  • Current Total Cost = Rs.250 + Rs.1,000 + Rs.50,000 = Rs.51,250



Calculation of Total Cost with Discount


  • New Material Cost = Material Cost x (1 - Discount%)

  • New Material Cost = Rs.50,000 x (1 - 0.04) = Rs.48,000

  • New Total Cost = Annual Ordering Cost + Annual Carrying Cost + New Material Cost

  • New Total Cost = Rs.250 + Rs.1,000 + Rs.48,000 = Rs.49,250



Decision and Counter Offer


  • The supplier's offer should be accepted as it reduces the total cost by Rs.2,000.

  • The counteroffer can be made to increase the discount percentage or reduce the minimum order quantity to achieve a better deal.

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A manufacturing company uses rs.50000 material per year,ordering cost per purchase is rs 50 and carrying cost is 20%,cost per unit of material is 20 rs .The company currently has optimum purchase policy .The supplier offer .04% discount,if the company purchase 5 times in a year .Should the offer be accepted ? If not what counter offer should be made ?
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A manufacturing company uses rs.50000 material per year,ordering cost per purchase is rs 50 and carrying cost is 20%,cost per unit of material is 20 rs .The company currently has optimum purchase policy .The supplier offer .04% discount,if the company purchase 5 times in a year .Should the offer be accepted ? If not what counter offer should be made ? 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 A manufacturing company uses rs.50000 material per year,ordering cost per purchase is rs 50 and carrying cost is 20%,cost per unit of material is 20 rs .The company currently has optimum purchase policy .The supplier offer .04% discount,if the company purchase 5 times in a year .Should the offer be accepted ? If not what counter offer should be made ? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A manufacturing company uses rs.50000 material per year,ordering cost per purchase is rs 50 and carrying cost is 20%,cost per unit of material is 20 rs .The company currently has optimum purchase policy .The supplier offer .04% discount,if the company purchase 5 times in a year .Should the offer be accepted ? If not what counter offer should be made ?.
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