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Bara enterprises operates in Kitale town. On annual basis, it orders 480,000 pens form a Nairobi based distributor. A packet of 24 pens delivered to Baras warehouse cost sh 480 including transport charges. The supermarket barrows money from ABC bank of an interest rate of 10% p.a 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) Calculate the economic order quantity (EOQ) for the pens ii) Total cost of the EOQ. iii) For orders for 72,000 pens and above the distributer has offered a discount rate of 10% on delivery price. Advice the management of the supermarket on whether to take advantages of the discount offer.
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