Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Note: Show your calculations in Excel by way using formulas that I can verify and recalculate. Calculations done outside Excel that can't be verified may

image text in transcribed

Note: Show your calculations in Excel by way using formulas that I can verify and recalculate. Calculations done outside Excel that can't be verified may lose marks. DO NOT round any answers. 1. A salon sells hair care sets at a fairly constant rate of 6 000 per year. The accounting department states that it costs $8 to place an order and annual holding costs are 20% of the purchase price of $3 per unit. It takes 4 days to receive an order. Assume a 300-(business) day year. (Hint: Use the standard EOQ model, 300 instead of 365.) a. What is the optimal order quantity? b. What is the number of orders per year? C. What is the time between orders in (business) days? d. What is the total annual cost at the EOQ? e. At what inventory level should a new order be placed? 2. A chemical firm produces a material and demand for this material is 20 kg per day. The capacity for producing the material is 50 kg per day. Set-up costs are $100 and storage and handling costs are $5/kg a year. The firm operates 200 (business) days a year. (Hint: Use the EPQ model with 200 instead of 365.) a. How many kilograms per run are optimal? b. What would the average inventory be for the optimal quantity? C. What is the length of a production cycle? d. How many set-ups per year would there be? e. How much could the firm save annually if the set-up cost can be reduced to $50? 3. A supermarket is open 350 (business) days per year. Daily demand for Oreo cookies averages 10 packs (just one size in this store). The cost of ordering Oreos is $1.25 per order and carrying costs are $0.50 per pack a year. Annual stockout costs are estimated to be $0.10 per pack. (Hint: Use the EOQ model with stockout costs.) a. How many times during a year should the company fill up its inventory? b. How long in (business) days is each period with stockout? C. What is the total cost per year

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information And Equity Valuation Theory, Evidence, And Applications

Authors: Guochang Zhang

1st Edition

1461481597, 9781461481591

More Books

Students also viewed these Accounting questions