a) Economic Order Quantity (EOQ) is the order quantity that minimises the sum of both the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
a) Economic Order Quantity (EOQ) is the order quantity that minimises the sum of both the holding and ordering costs under the fixed-order quantity system. The formula of the Economic Order Quantity (EOQ) is given below: 2.C.R EOQ= P-F where P=Purchase cost per unit R=Forecasted usage (demand) C = Cost per order Q Number of units ordered F=Holding cost factor Considering the background of the following case study: "The annual demand for an SKU (stock keeping unit) is 10,075 units, and it is ordered quantities of 650 units. Suppose the ordering cost is $30 per order, the holding cost is 20%, and the unit cost is $15. Suppose the Economic Order Quantity (EOQ) assumptions hold, i.e., constant demand and no shortage." ii) Calculate the average inventory and the number of orders placed per year. (2 marks) iv) Calculate the annual total inventory costs for the given case. Calculate the EOQ and the reordering point with five days lead time. (2 marks) (3 marks) v) Calculate the annual total inventory costs if EOQ is used. (2 marks) a) Economic Order Quantity (EOQ) is the order quantity that minimises the sum of both the holding and ordering costs under the fixed-order quantity system. The formula of the Economic Order Quantity (EOQ) is given below: 2.C.R EOQ= P-F where P=Purchase cost per unit R=Forecasted usage (demand) C = Cost per order Q Number of units ordered F=Holding cost factor Considering the background of the following case study: "The annual demand for an SKU (stock keeping unit) is 10,075 units, and it is ordered quantities of 650 units. Suppose the ordering cost is $30 per order, the holding cost is 20%, and the unit cost is $15. Suppose the Economic Order Quantity (EOQ) assumptions hold, i.e., constant demand and no shortage." ii) Calculate the average inventory and the number of orders placed per year. (2 marks) iv) Calculate the annual total inventory costs for the given case. Calculate the EOQ and the reordering point with five days lead time. (2 marks) (3 marks) v) Calculate the annual total inventory costs if EOQ is used. (2 marks)
Expert Answer:
Related Book For
Essentials of Business Analytics
ISBN: 978-1285187273
1st edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann, David Anderson, Dennis Sweeney, Thomas Williams
Posted Date:
Students also viewed these finance questions
-
Andretti Company has a single product called a Dak. The company normally produces and sells 8 9 , 0 0 0 Daks each year at a selling price of $ 6 2 per unit. The company s unit costs at this level of...
-
CANMNMM January of this year. (a) Each item will be held in a record. Describe all the data structures that must refer to these records to implement the required functionality. Describe all the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
It is stated in Section 40.3 that a finite potential well always has at least one bound level, no matter how shallow the well. Does this mean that as U 0 0, E 1 0? Does this violate the Heisenberg...
-
Refer to the situation described in BE7- 14. Assume the sum of estimated future cash flows is $ 32 million instead of $ 38 million. What amount of impairment loss should Vegetarian Delights record?
-
Sweetwater Nursing Home has 150 beds. Its cost and volume data are as follows. Calculate its average and marginal costs for volumes ranging from 100 to 140. What patterns do you see? Residents 80 100...
-
Consider the primitive LES and RANS models, in which the eddy viscosity formulas (11.32) and (11.77) are applied with constant eddy viscosity \(\mu_{t}\). What is the drawback of these models? Should...
-
Williams & Sons last year reported sales of $10 million and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firms...
-
Sales Piedmont Company segments its business into two regions-North and South. The company prepared the contribution format segmented income statement as shown Total Company $750,000 450,000 North $...
-
Determine the breakeven volume of injections for 2016 using the following formula for the contribution margin ratio approach: Breakeven revenue = Total fixed costs + [(Total variable costs / Total...
-
Question 2 of 5 < The unadjusted trial balance for Crane Designs at its year end, April 30, 2024, is as follows: CRANE DESIGNS Trial Balance April 30, 2024 Debit Credit Cash Accounts receivable...
-
Company A made the following payments related to the construction of a building: $100,000 on January 1, $350,000 on May 31, and $500,000 on December 31. Calculate the weighted-average accumulated...
-
What columns in the Cash Disbursements Journal are for debit amounts?
-
1 QUESTION 10 (6 marks) 2 3 4 A companymaintains a $400 petty cash fund. On January 31, 2023 there was $225.25 remaining cash in the petty cash box and receipts for the following: 5 6 Delivery...
-
Castle Corp. decided to go into the market to repurchase bonds before their due date. On the date of retirement, the balance on the Bonds Payable account was $5,000,000 and the balance on the...
-
Q1. A company is planning to venture overseas through EXPORT operation. Please tell the owner of this company, the pros and cons of entering global market as (i) direct exporter, (ii) indirect...
-
Select a system of your ownone you work on, one you are interested in, or one you find on the internetand draft the outline of a Systems Engineering Management Plan (SEMP) for it. Your response: What...
-
Velshi Printers has contracts to complete weekly supplements required by fortysix customers. For the year 2018, manufacturing overhead cost estimates total $600,000 for an annual production capacity...
-
The International Organization of Motor Vehicle Manufacturers (officially known as the Organisation Internationale des Constructeurs dAutomobiles, OICA) provides data on worldwide vehicle production...
-
Andalus Furniture Company has two manufacturing plants, one at Aynor and another at Spartanburg. The cost in dollars of producing a kitchen chair at each of the two plants is given here. The cost of...
-
Dixie Showtime Movie Theaters, Inc., owns and operates a chain of cinemas in several markets in the southern United States. The owners would like to estimate weekly gross revenue as a function of...
-
Kate Club Inc. has determined that there are four temporary differences between the tax basis and the GAAP book value of assets and liabilities that resulted in the following deferred taxes: (a)...
-
In 2020, Cardinals Company operated at a tax loss, totaling \(\$ 88,000\) during its first year of business. Assuming a tax rate of \(25 \%\), and that income is expected in 2021 , record the entry...
-
Springs Inc. has taken a tax position in 2020 that it believes is based on fairly clear tax law for the payment of \(\$ 80,000\) in salaries and benefits to employees. There are no limits on...
Study smarter with the SolutionInn App