Suppose you are working as a Inventory Manager in a manufacturing company. Your company requires 1000 units of raw material per month. The ordering cost is Rs 100 per order. The carrying cost is 15% of average inventory per order. The cost of raw material is Rs 10 per unit. The company can get a discount of 3% on price of it orders 5000 or more units upon orders of 8000 units or more the company get a discount of 5%.
1) How you will calculate the Economic order quantity?
2) Should you feel that company accept a discount?
3) If so which discount do you think that your company should accept?
4) Why give reasons and justify your view?