Question
In: Accounting
A supplier to your company has offered you a reduced price per unit on a component...
A supplier to your company has offered you a reduced price per unit on a component if you agree to purchase the component in higher order quantities.? Currently, you order 8,000 units each time an order is placed for the? component, and you pay ?$7.00 per unit. Your ordering costs are estimated to be ?$72 per order regardless of the order size. Transportation costs are estimated to be ?$0.30 per unit. Your cost to hold a component part in inventory is estimated at 22% annually based on the cost of the purchased item. The supplier has offered you a cost of ?$5.80 per unit if you increase your purchasing quantity to 12,000. ?Currently, your company purchases 101,000 of these components? annually, and this total demand is expected to remain constant for the foreseeable future. Should you continue with your current? policy, or should you take the incentive offered by the? supplier?
A. The total landed cost with the order quantity size of 8,000 units is?
B. The total landed cost with the bulk ordering quantity of 12,000 units is?
C. Based on the landed cost tradeoff? calculations, the company should choose the?
Solutions
Expert Solution
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