Use an order quantity to take advantage of the discount

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Reference no: EM131124819

Wilshire Farms uses 6000 pounds per year of a special feed supplement that costs $5 per pound. The supplement’s supplier offers a two percent discount (to $4.90 per pound) if it is ordered in quantities of 3000 pounds or more at a time. It costs $100 to place and receive an order. Wilshire uses an inventory carrying charge of 40 percent of the supplement’s per pound value per year. Perform a cost analysis to determine whether Wilshire should use the economic order quantity (EOQ) or should order a quantity (that is not an EOQ) to take advantage of the discount. If Wilshire should use an order quantity to take advantage of the discount, what is this order quantity?

Reference no: EM131124819

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Use an order quantity to take advantage of the discount : Wilshire Farms uses 6000 pounds per year of a special feed supplement that costs $5 per pound. The supplement’s supplier offers a two percent discount (to $4.90 per pound) if it is ordered in quantities of 3000 pounds or more at a time. It costs $100..

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