Supplier Decision – NBC Institute

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

Question

MM Company Ltd., a manufacturer of groundnut paste, wishes to know whether it is advisable to stick to its economic orders or accept a special order from a foreign supplier for the supply of groundnuts. The following information has been provided:

Purchase price per bag of groundnut: GH¢360
Holding cost per annum is 10% of the cost of a bag of groundnut
Ordering cost per annum: GH¢7.7
Annual demand of groundnut paste: 6,000 bags
Normal usage per month: 520 bags
Minimum usage per month: 500 bags
Maximum usage per month: 700 bags

Required:

i) The foreign supplier promises a reduction in the price of a bag of groundnut by 8% if MM Company is willing to order 3,000 units each time it wants to order. Advise MM.
(10 marks)

ii) What is the difference between a bin card and a store ledger card?
(3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Analysis, Economic Order Quantity (EOQ), Inventory Management, Supplier Decision
Level: Level 2

Topic: Decision making techniques, Relevant Cost and Revenue
Series: MAY 2016

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

Question

Purchase price per bag of groundnut: GH¢360
Holding cost per annum is 10% of the cost of a bag of groundnut
Ordering cost per annum: GH¢7.7
Annual demand of groundnut paste: 6,000 bags
Normal usage per month: 520 bags
Minimum usage per month: 500 bags
Maximum usage per month: 700 bags

Required:

i) The foreign supplier promises a reduction in the price of a bag of groundnut by 8% if MM Company is willing to order 3,000 units each time it wants to order. Advise MM.
(10 marks)

ii) What is the difference between a bin card and a store ledger card?
(3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Analysis, Economic Order Quantity (EOQ), Inventory Management, Supplier Decision
Level: Level 2

Topic: Decision making techniques, Relevant Cost and Revenue
Series: MAY 2016

Question Tag: Supplier Decision

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MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

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Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

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Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

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