ADVANCE FINANCIAL MANAGEMENT Inventory Management

Ordering Costs

BACAY Corporation expects to use 10,000 units of material XPO per month in 2021. Last year, the total ordering costs amounted to P200,000 for a total of 40 orders. It is expected that prices in 2021 would be 10% higher than that of last year. Determine the expected ordering costs in 2021 if the company orders in a batch of 12,000 units or 24,000 units.

Total Carrying Costs

In 2020, RBRB Company incurred a total of P800,000 for inventory carrying costs with an average inventory of 200,000 units. What would be the total carrying costs in 2021 if the order size is 500,000 units or 900,000 units, assuming the company does not maintain safety stock quantity?

Average Inventory

UPHSD Corporation buys material 101 at the optimum level of 40,000 units. Its daily consumption of Material 101 is 1,000 units. Materials are evenly used throughout the year. Determine the average inventory balance for Material 101.

Basic EOQ

Assume an annual requirement of 24,000 units, a cost per unit of P20, a cost per order of P750, and a carrying cost percentage of 20%. Applying the formula to these data, compute for the EOQ.

Behavior of Ordering Costs and Carrying Costs

Assume an annual requirement of 24,000 units, a cost per unit of P20, a cost per order of P750, and a carrying cost percentage of 20%. Considering order size of 1,200, 1,500, 2,000, 3,000, 4,000, 6,000, 12,000 and 24,000, determine the total ordering costs and total carrying costs.