A videoke bar buys draft beer by the barrel from a local distributor. The bar has an annual demand of 9,000 barrels, which it purchases at a price of P205 per barrel. The annual carrying cost is 12% of the average inventory and the cost per order is P160. The distributor has offered the bar owner a reduced price to P190 per barrel if the owner will order a minimum of 300 barrels per order. What is the EOQ without a discount ? What is the EOQ with discount? Should the bar owner take the offer?

A videoke bar buys draft beer by the barrel from a local distributor. The bar has an annual demand of 9,000 barrels, which it purchases at a price of P205 per barrel. The annual carrying cost is 12% of the average inventory and the cost per order is P160. The distributor has offered the bar owner a reduced price to P190 per barrel if the owner will order a minimum of 300 barrels per order. What is the EOQ without a discount ? What is the EOQ with discount? Should the bar owner take the offer?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter16: Lean Supply Chain Management

Section: Chapter Questions

Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...

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