A-Mart Stores sells small-screen television sets in its many retail outlets. Typ

Question

A-Mart Stores sells small-screen television sets in its many retail outlets. Typical total sales for all stores are projected to be 120,000 units. The vendor in South Korea normally sells the sets for $100U.S. However, the vendor will offer a $5 discount if a buyer will place a special order of at least 20,000 units. The buyer's carryinq costs are 30% per year, and the cost to prepare purchase orders is $40 per order. Transportation costs are included in the price. If there were no such a discount, the economic order quantity would have been 566 units. Given that the buyer accepts the discount and chooses the special order size above, how long would such an order last in inventory, in terms of years? a. 0.10 years b. 0.18 years c. 0.25 years d. 1 year e. 2 years

Explanation / Answer

The maximum inventory will be same as order size.

Thus maximum inventory will be 20,000 which will deplete at a steady rate upto ZERO

Annual demand = 120,000

Therefore , duration for which the inventory of 20,000 would last = 20,000/120,000 year = 0.17 ( rounded to 2 decimal numbers )

This is nearest to option “0.18”.

THE INVENTORY WILL LAST FOR 0.18 YEARS

THE INVENTORY WILL LAST FOR 0.18 YEARS

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