Case of variable quantity-discounts structures, Managerial Accounting

The case of variable quantity discounts

In practice, suppliers may offer different discounts for different quantities purchased. For illustration:

   Segment       Quantity Purchased           Unit Price
    1                       0 — 500                     Shs 100
    2                     501 — 1,000                 Shs  90
    3                    1001 — 1,500                 Shs  80
    4                    over — 1,500                 Shs  70

The best approach to the solution in this case is to apply the price-breaks theorem. This works as shown below:

(1) For each segment an EOQ is calculated. There are two probable requests:

  • The EOQ is within the quantity segment (i.e. valid). In this case, the EOQ is used as the minimum cost quantity for that segment.
  • The EOQ is outside the quantity segment (i.e. not valid). In this case the minimum cost quantity will be the quantity within the segment closest to the EOQ as calculated.

 

(2) Select the quantity that leads to the lowest total inventory costs (i.e. Purchase, Ordering & Carrying).

Posted Date: 12/6/2012 6:21:07 AM | Location : United States







Related Discussions:- Case of variable quantity-discounts structures, Assignment Help, Ask Question on Case of variable quantity-discounts structures, Get Answer, Expert's Help, Case of variable quantity-discounts structures Discussions

Write discussion on Case of variable quantity-discounts structures
Your posts are moderated
Related Questions
Constraints 1) A constraint of the type ≤ (≥) can be converted to an equation by adding a slack variable to (subtracting a surplus variable form) the left side of the constrain

Explain Support activitiesand production process activity Support activities are for example schedule production set up machine purchase materials inspect item customer orde

How to write introduction on strategy plan

Working Capital management is affected through two characteristics of current assets that are as follows (i) short life span (ii) swift transformation in the other asset forms.

Review the roles of management accounting within a company. 1.What is the most important role of management accounting? 2.How is that different than financial accounting? 3.What is

One of the main deities of the financial manager is to keep a sound liquidity position for the firm hence the dues are settled as and while they mature. Separately from this the fi

Describe the Nature of standard costing The system of standard costs (standard costing) is a management technique of using predetermined costs (standard costs) for evaluating p

find full-cost& variable cost using transfer pricing method

Explain Indirect expanses: These are expanses which can't be directly conveniently and wholly allocated to a specific cost centres or cost units examples of such expanses are h

Advance Factoring and Maturity Factoring: In both recourse and non-recourse factoring whether the factor advances cash against book debts to the client instantly on assignment