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EOQ Model with quantity discounts
Circumstances frequently occur where firms are able to obtain quantity discounts for large purchase orders. Buying in bulkiness has some merits and demerits.
Advantages:(i) A saving in purchase rule decreases in unit cost, which consists of the total amount of discount for the period.
(ii) A reduction in the total ordering costs because fewer orders are placed to take advantages of the discounts.Disadvantages:
Increased holding cost arising from higher stock levels when large quantities are purchased. Like:
• Stock out cost• Insurance• Deterioration• Security etc.
Yuma foods acquire Aldo's tortillas several years ago. Aldo's continued to operate as an independent company, except that Yuma foods has exclusive authority over capital investment
10 questions
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