11-26-2012, 10:16 PM
Idea Solution
Here is what I think, since we have a bumper cotton crop, we will not increase any other prices except for the ones asked by the question.
That way:
Per Unit Cost
Annual Required Units
Ordering Cost for One Order
Carrying Costs
Previous Contract
500
12,500
2000
10%
Proposed Contract
500
15,625
2000
12%
Moving on ,
EOQ = [(2xRUxOC)/(UCxCC%)]^1/2
Total Ordering Cost= Required Units/Order Quantity = Number of Orders
= Number of Orders x Cost per Order
Total Carrying Cost = Ordering Quantity/2 = Average Ordering Quantity
=Carry Cost per Unit = Unit Cost x CC%
= Average Ordering Quantity x Carrying Cost Per Unit
Total Cost = Total Ordering Cost x Total Carrying Cost
Per Unit Cost = Total Cost/Order Quantity
Order Quantity
Total Ordering Cost
Total Carry Cost
Total Cost
Per Unit Cost
Previous Contract
1000
25000
25000
50000
50
Proposed Contract
1020.6
31250
30618
61868
60.62
Hence Accountant is right.
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