256-B-M-L-O-M_(1869)

Cesar Rego Computers, a Mississippi chain of computer hardware and software retail
outlets, supplies both educational and commercial customers with memory and storage
devices. It currently faces the following ordering decision relating to purchases of high-
density disks:
D = 36,000 disks
S = $25
H = $0.45
Purchase price = $ .85
Discount price = $0.82
Quantity needed to qualify for the discount = 6,000 disks
Should the discount be taken?


SOLUTION


At the Economic Order Quantity, we have:


EOQ  (2 36,000 25) / 0.45 2,000 units.

The total costs at this quantity are:

Holding cost  Q/2  H  1,000  .45  $450

Ordering cost  D/Q  S  36,000/2,000  25  $450

Purchase cost  D  P  36,000  0.85  $30,600

Total cost  $900  $30,600  $31,500


At the quantity discount, we have:

Holding cost  Q/2  H  3,000  .45  $1,350

Ordering cost  D/Q  S  36,000/6,000  25  $150

Purchase cost  D  P  36,000  0.82  $29,520


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