QUESTION 1 Contin (c) Total cost Q 10000 $100× 400 =$2500+$10000 =$12500 o determine the acceptability of the quantity discount, it is necessary to compare the sav ings on the cost of the goods with the increase in inventory policy costs Purchase Price Savings(10 000 X $0. 30) 3000 Less Increase in Inventory Policy Costs($12 500-$10 000) Net Gain/Benefit The firm should therefore. avail itself of the discount offered QUESTION 2 O=$2000 2×S×O EOQ 2×50×$2000 50000 223.6 or 224 tonnesAugust 2003 QUESTION 1 (Continued) (c) = $12 500 = $2 500 + $10 000 2 400 $50 400 10 000 = $100 2 Q C Q S Total cost 400 = O        +              +           To determine the acceptability of the quantity discount, it is necessary to compare the savings on the cost of the goods with the increase in inventory policy costs: Purchase Price Savings (10 000 ×$0.30) $3 000 Less: Increase in Inventory Policy Costs ($12 500 - $10 000) 2 500 Net Gain/Benefit $ 500 The firm should, therefore, avail itself of the discount offered. QUESTION 2 C = $4 S = 50 O = $2000 = 223.6 or 224 tonnes = 50 000 $4 2 50 $2 000 = C 2 S O EOQ =    