Answer:
D. Quantity discounts are available.
Explanation:
The computation of the economic order quantity is shown below:
= [tex]\sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
The total cost is computed below:
= Purchase cost + ordering cost + carrying cost
These three components are required to compute the total cost and for calculating the economic order quantity, the ordering cost and the carrying cost is required.
The number of orders would be equal to
= Annual demand ÷ economic order quantity
The average inventory would equal to
= Economic order quantity ÷ 2
The total cost of ordering cost and carrying cost equals to
Ordering cost = Number of orders × ordering cost per order
Carrying cost = average inventory × carrying cost per unit
No quantity discounts are available.
