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How much is the cost of failing to take the discount

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Reference no: EM132964701

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Q1. Mako has projected sales of 72,000 pipes this year, ordering cost of $6 per order, and carrying costs of $2.40 per pipe.

Find: a: Economic ordering quantity

b. Total inventory cost at EOQ

c. Number of orders that will be placed during the year

d. Average inventory

Q2. OML Company uses 300,000 units of part X a year. The average purchase lead time is 20 working days and the maximum is 27 working days. The company's annual operations cover 240 days allowing for shutdowns for plant maintenance, holidays and Sundays. The firm wants to keep safety stock to guard against stock outs. Compute the safety stock in units.

Q3. Poe Corporation sells 100,000 tea bags a year. Other information are the following:

Selling price/bag - $2.50

Carrying cost - 20% of unit cost

Purchase cost/bag - $1.50

Operating days per year - 250

Ordering cost - 5.40/order

Average lead time on purchases - 6 days

Maximum lead time - 13.5 days

What is the reorder point?

Q4. Rona Company buys on terms 2/10, net 30, but generally does not pay until the 40 days after invoice date. Its purchases total is $2,160,000 per year. Assuming 360 days a year, how much is the amount of "non-free" trade credit used by the firm on the average each year?

Q5. Voice Company owes $40,000 to one of its suppliers. The supplier has offered a trade discount of 2/10 net 30. Voice Company can borrow the funds from either of two banks: Metrobank will loan the funds for 20 days at a cost of $400; Chinabank offers a discounted loan for 20 days at a cost of $320.

a. How much is the cost of failing to take the discount?

b. How much is the effective interest rate on each of the loans?

c. Should Voice Company take the cash discount?

d. What bank loan should Voice Company use?

Reference no: EM132964701

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