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ACME Enterprise currently sells candies for $250 which includes a mark-up of 25%. Each order...

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Accounting

ACME Enterprise currently sells candies for $250 which includes a mark-up of 25%. Each order is placed by a single individual that charges an average rate of $40 per hour. To file the paperwork as well as to make the necessary telephone calls to the supplier takes an average five hours. While, the cost of holding each unit of inventory is $10 per unit.

Currently, the company orders 25,000 sucrose quarterly. Management was advised that if the current order size is doubled, the entity stands to benefit from a 2.5% discount. However, if the purchase is two and a half times the current lot size, the company will receive a 5% discount. Meanwhile, a 10% discount is to be received if management purchases four times the current lot size.

Management now wants to know the companys optimal order quantity.

1). Calculate the EOQ based on the formula. 2). calculate the total cost based on the EOQ. 3). calculate the total cost for each individual alternative order quantity. it should include the current policy. 4). Which order quantity is considered the optimal order quantity and Why? 5). state 3 assumptions of the EOQ model.

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