Case of variable quantity-discounts structures, Managerial Accounting

Assignment Help:

The case of variable quantity discounts

In practice, suppliers may offer different discounts for different quantities purchased. For illustration:

   Segment       Quantity Purchased           Unit Price
    1                       0 — 500                     Shs 100
    2                     501 — 1,000                 Shs  90
    3                    1001 — 1,500                 Shs  80
    4                    over — 1,500                 Shs  70

The best approach to the solution in this case is to apply the price-breaks theorem. This works as shown below:

(1) For each segment an EOQ is calculated. There are two probable requests:

  • The EOQ is within the quantity segment (i.e. valid). In this case, the EOQ is used as the minimum cost quantity for that segment.
  • The EOQ is outside the quantity segment (i.e. not valid). In this case the minimum cost quantity will be the quantity within the segment closest to the EOQ as calculated.

 

(2) Select the quantity that leads to the lowest total inventory costs (i.e. Purchase, Ordering & Carrying).


Related Discussions:- Case of variable quantity-discounts structures

Status resources, Status Resources We had classified constraints as sca...

Status Resources We had classified constraints as scarce and abundant, depending respectively on whether or not the optimum solution "consumes" the entire available amount of t

What are the characteristics of product life cycle, Characteristics of prod...

Characteristics of product life cycle The major characteristics of life-cycle concept are as follows: 1) The products have finite live and pass by the cycle of development i

Information system project management, Hi there, i am looking an expert to ...

Hi there, i am looking an expert to make my assignments for this subject and i do have other subjects as well. Let me know how you can go through my assignment.

Jit purchasing-jit aims, JIT purchasing On the other hand is a purchasi...

JIT purchasing On the other hand is a purchasing system in which material purchased are contracted so as that the receipt and usage of materials to the maximum extent possible,

Treasury risk management, A few of the main focus areas of treasury operati...

A few of the main focus areas of treasury operations are as follows: 1) Cash Flow-Receipts and Disbursements: Accelerating the collection of cash receipts and mobilization or

Adjacent extreme points, Adjacent extreme points differ in only one variabl...

Adjacent extreme points differ in only one variable The first observation indicates that we can identify the extreme points of the solution space algebraically by setting zero as

Manufacturing cost, what are the different arguments against direct materia...

what are the different arguments against direct materials, direct labor, and factory overhead

Budget preparation-monitoring and evaluation , Budget Preparation The ...

Budget Preparation The organization's budget is ready following the acceptance and sanction of the decision packages. Once the budget of organization has been accepted manager

Decision making environment-risk seeking-neutral-averse, Risk seeking:  ...

Risk seeking:  A risk seeker is a decision maker who is concerned in the best likely outcome no matter how small the chance that they might take place i.e. he takes high risks

Maximum Price company would pay, Cause Company is planning to invest in a m...

Cause Company is planning to invest in a machine with a useful life of five years and no salvage value. The machine is expected to produce cash flow from operations of $20,000 in e

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd