Bora Supermarket carries on its operations in Kisumu town. On annual basis, it orders 480,000 pens from a Nairobi based distributor.

      

Bora Supermarket carries on its operations in Kisumu town. On annual basis, it orders 480,000 pens from a Nairobi based distributor. A packet of twenty four pens delivered to Bora‟s warehouse costs Sh.480 including transport charges. The supermarket borrows money from BHK bank at an interest rate of 10% per annum to finance its inventories. The supermarket also incurs Sh.1, 500 to place an order for the pens and Sh.8 carrying cost for each pen. Required:

(i) Economic order quantity (EOQ) for the pens
(ii) Total cost at the economic order quantity
(iii) For orders of 72,000 pens and above, the distributor has offered a discount rate of 10% on delivery price.

Advise the management of the supermarket on whether to take advantage of the discount offer.

  

Answers

---

Solution



Advise: They should take advantage of the discount offer as it has lower cost.

---

Wilfykil answered the question on August 5, 2019 at 11:44

Next: The diagram below represents the Haber process for the manufacture of ammonia. Study it and answer the questions that follow.
Previous: The following was carried out to determining the humus content in soil sample. The sample weighing 120gm was heated in an oven at 105⁰c. the...

View More Capital Structure and Financial Management Questions and Answers | Return to Questions Index

Exams With Marking Schemes

• Grade 1
• Grade 2
• Grade 3
• Grade 4
• Grade 5
• Grade 6
• Grade 7
• Grade 8
• Grade 9
• PP1
• PP2
• Playgroup
• Form 1
• Form 2
• Form 3
• Form 4

Related Questions

---

• List the four cost associated inventory(Solved)
  

  List the four cost associated inventory

  Date posted: August 5, 2019.  Answers (1)

• Tido ltd buys and sells products Q3. It values stock on the basis of LIFO. As at 1st June 2001 stock in hand consisted of...(Solved)
  

  Tido ltd buys and sells products Q3. It values stock on the basis of LIFO. As at 1st June 2001 stock in hand consisted of 4500 units which was acquired at sh 50 per unit. The operations for the month were as follows.
  

  Date posted: August 5, 2019.  Answers (1)

• Explain the Purchasing Systems(Solved)
  

  Explain the Purchasing Systems

  Date posted: August 5, 2019.  Answers (1)

• Give the Steps followed in Procurement of Materials(Solved)
  

  Give the Steps followed in Procurement of Materials

  Date posted: August 5, 2019.  Answers (1)

• List the Concepts of Cost accounting(Solved)
  

  List the Concepts of Cost accounting

  Date posted: August 5, 2019.  Answers (1)

• What is the definition of: 1. Cost 2. Cost units(Solved)
  

  What is the definition of:
  1. Cost
  2. Cost units

  Date posted: August 5, 2019.  Answers (1)

• Discuss the term "Management Accounting"(Solved)
  

  Discuss the term "Management Accounting"

  Date posted: August 5, 2019.  Answers (1)

• What is the difference between financial accounting and cost accounting?(Solved)
  

  What is the difference between financial accounting and cost accounting?

  Date posted: August 5, 2019.  Answers (1)

• What is the meaning of Financial accounting?(Solved)
  

  What is the meaning of Financial accounting?

  Date posted: August 5, 2019.  Answers (1)

• Discuss Cost accounting and control(Solved)
  

  Discuss Cost accounting and control

  Date posted: August 5, 2019.  Answers (1)

• Discuss the definition of and Scope of Cost Accounting(Solved)
  

  Discuss the definition of and Scope of Cost Accounting

  Date posted: August 5, 2019.  Answers (1)

• Explain the Cost of Redeemable Debentures and Preference Shares(Solved)
  

  Explain the Cost of Redeemable Debentures and Preference Shares

  Date posted: August 5, 2019.  Answers (1)

• Which are the Methods/models of Computing Cost of Capital?(Solved)
  

  Which are the Methods/models of Computing Cost of Capital?

  Date posted: August 5, 2019.  Answers (1)

• Highlight the importance of Cost of Finance(Solved)
  

  Highlight the importance of Cost of Finance

  Date posted: August 5, 2019.  Answers (1)

• What is meant by "Cost of Retaining Finance"?(Solved)
  

  What is meant by "Cost of Retaining Finance"?

  Date posted: August 5, 2019.  Answers (1)

• What is the meaning of the term "Cost of Finance"?(Solved)
  

  What is the meaning of the term "Cost of Finance"?

  Date posted: August 5, 2019.  Answers (1)

• Give the factors that affect Capital Structure(Solved)
  

  Give the factors that affect Capital Structure

  Date posted: August 5, 2019.  Answers (1)