Question

Meena Distributors has an annual demand for an airport metal detector of 1,420 units. The cost of a typical detector to Meena is $400. Carrying cost is estimated to be 18% of the unit cost, and the ordering cost is $27 per order, H Purushottama Meena, the owner, orders in quantites of 300 or more, he can get a 4% discount on the cost of the detectors. Should Meena take the quantity discount?

What is the EOQ without the discount?
EOQ=___________ units (round your mosponse to one decimal place).
Since the total cost with the discount is___________ the total cost without the discount,

Answer 1

To determine if Meena Distributors should take the quantity discount, we calculate the EOQ without the discount and compare the total costs with and without the discount.

Step-by-step explanation:

To determine if Meena Distributors should take the quantity discount, we need to compare the total cost with and without the discount. Without the discount, the Economic Order Quantity (EOQ) can be calculated using the EOQ formula: EOQ = sqrt((2 * demand * order cost) / carrying cost). Given that the demand is 1,420 units, the order cost is $27, and the carrying cost is 18% of $400, we can calculate the EOQ without the discount, which is _______ units (round to one decimal place).

To find the total cost without the discount, we multiply the EOQ without the discount by the unit cost of $400 and add the carrying cost. To compare, we can find the total cost with the discount by applying the 4% discount to the unit cost, calculating the EOQ using the discounted unit cost, and adding the carrying cost. Finally, we compare the total costs to determine if Meena Distributors should take the quantity discount.