EXERCISE Inventory Management Avtek, a distributor of audio and video equipment, wants to reduce a large stock of televisions. It has offered a local chain of stores a quantity discount pricing...

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EXERCISE
Inventory Management

Avtek, a distributor of audio and video equipment, wants to reduce a large stock of televisions.
It has offered a local chain of stores a quantity discount pricing schedule as follows:


Quantity Price

1-49 $1,400
XXXXXXXXXX $1,100
90+ $ 900


The annual carrying cost for the stores for a TV is $190, the ordering cost is $2,500, and annual demand
for this particular model TV is estimated to be 200 units. The chain wants to determine if it should take
advantage of this discount or order the basic EOQ order size.
Answered Same DayMay 02, 2021

Solution

Khushboo answered on May 03 2021
21 Votes
Solution
Firstly, we need to determine the optimal order size and total cost as per the EOQ Model
EOQ = √ 2 AO/Carrying...
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