North Manufacturing has a demand for 1,000 pumps each year. The cost of a pump is $50. It cost North Manufacturing $40 to place a order, and the carrying cost is 25% of the unit cost. If pumps are ordered in quantities of 200, North Manufacturing can get a 3% discount on the cost of pumps. Should North Manufacturing orders 200 pumps at a time an take the 3% discount?
In this we have to compare the costs with EOQ and order of 200 pumps.
EOQ= SQRT ((2AO)/C)
A= Annual demand= 1000
O= ordering cost per order= 40
C= Carrying cost per unit= 25% of unit cost=12.5
EOQ= Q= 80 units
b) Find ...
Calculations to find out whether a North Manufacturing company should order certain pumps at a 3% discount.