Micro Corp. uses 1,000 units of Chip annually in its production.Order costs consist of $10 for placing a longdistance call to make the order and $40 for delivering the order by truck to the company warehouse.Each Chip costs $100, and the carrying costs are estimated at 15.625% of the inventory cost.

Required:

Compute the economic order quantity.

Determine the total order and carrying cost based on EOQ.

Determine the best order quantity if Chip is purchased only in multiples of 25 units.(Round answers to the nearest whole dollar in case of calculating order and carrying cost in proving the best order size.)

PROBLEM 2:

Charleston Company has developed the following data to assist in controlling one of its inventory items:

Economic order quantity1000liters

Average daily use100liters

Maximum daily use120liters

Working days per year250days

Safety stock140liters

Cost of carrying inventory$1.00per liter per year

Lead time7 working days

Required:Compute the following:

Order point

Average inventory

Maximum inventory assuming normal lead time and usage

Cost of placing one order

PROBLEM 3:

Etchas Company is a manufacturer of men and women underwear. During the month of September 2019, the accounting records show the following raw materials transactions:

September 1, beginning materials inventory of 470 yards at cost of $5/yard

September 7, received from purchase 70 yards at a cost of $4.50/yard

September 15, issued 250 yards for production

September 18, received from purchase 120 yards at a cost of $4.75/yard

September 20, returned to supplier 10 yards (assume materials returned were from the most recent purchase)

September 26, issued 250 yards for production

September 27, returned 10 yards already issued to the warehouse (assume materials returned were from the most recent issuance)

September 30, received from purchase 30 yards at a cost of $5.10/yard

Required: Calculate the ending raw materials inventory and raw materials used under the following inventory systems:

a.FIFO

b.Weighted average

c.Moving average

PROBLEM 4:

Bunak Company would like to assess its safety stock level if it will cost them high or low. Recently, the management sets that the total safety stock carrying and stockout costs for the year should not exceed $110. Their current information about the current level of safety stock and other information follows:

Safety stock level30 units

Probability of stockout per order15%

Carrying cost per unit$1.50

Stockout cost$15

Annual demand1,000

Economic order quantity250

Required: Based on the information, decide whether the current safety stock level meets the management's requirements.

Answer rating: 100% (QA)

Problem 1 Ordering cost per order Order placement cost Delivery cost 10 40 50 Inventory carrying cost per unit per year 15625 of cost price 15625 of 100 015625 100 15625 EOQ 2 Ordering cost Annual dem... View the full answer