The purchase department of your organization has received an offer of quantity discounts on its order of materials as under:
|
Price per tonne |
|
|
tonne |
|
|
1,400 |
Less than 500 |
|
1,380 |
more than 500 and less than 1,000 |
|
1,360 |
more than 1,000 and less than 2,000 |
|
1,340 |
more than 2,000 and less than 3,000 |
|
1,320 |
3,000 and above |
The annual requirement of the material is 5,000 tonne. The delivery cost per order is Rs. 1,200 and the annual stock holding cost is estimated at 20% of the average inventory.
The purchase department wants you to consider the following purchase options and advise which among them will be the most economical ordering quantity, presenting the relevant information in a tabular form.
The purchase quantity orders to be considered are 400, 500, 1,000, 2,000 and 3,000 tonne.