02 December 2008
ur factory buys & uses a component for production at rs. 10 per piece. Annual requirement is 2000 mos. Carrying cost of inventory is 10percent p. a. & ordering cost is rs. 40 per order. Purchase manager argues that as ordering cost is very high, its advantage to place a single order for entire annual requirement. he also says that if we order 2000 at a time we can get a 3 percent discount from the supplier. Evaluate this proposal & make ur recoomendation?
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