Question

URGENT

Ltd uses the Economic Order Quantity Model to determine order quantities. The following information is given for the next year:

Order costs 20 per order

Delivery costs 5 per order

Holding costs 10% of purchase price per annum

Annual demand 27,000 units

Purchase price 40 per unit

No safety stocks are held.

a. What is the EOQ?

b. What are the total annual costs of stock if the company uses EOQ to determine quantity ordered every time (i.e. the total purchase cost plus total ordering cost plus total holding cost)?

c. A supplier has offered a 1% reduction in the purchase price if a minimum of 1000 units are ordered per order. Compute the total annual cost if PoMA decided to avail this option. What saving or incremental cost would this result in for PoMA Ltd compared to ordering the EOQ?

Answer #1

(URGENT ) PoMA Ltd uses the Economic Order Quantity Model to
determine order quantities. The following information is given for
the next
year:
Order
costs
20 per order
Delivery
costs
5 per order
Holding
costs
10% of purchase price per annum
Annual
demand
18,000 units
Purchase
price
40 per unit
No safety stocks are
held.
a. What is the EOQ?
b. What are the total annual costs of stock if the company...

Sam Wood Ltd always use Economic order quantity model
to determine its raw materials requirements. What will be the
effect on the economic order quantity and the total annual holding
cost of a decrease in the cost of ordering a batch of raw materials
*
(a) The EOQ and the total annual holding cost will both be
higher
(b) The EOQ will be lower and the total annual holding cost will be
higher
(c) The EOQ and the total annual...

Sharon Ltd has in the past ordered raw
material T in quantities of 3,000 units which is half a year’s
supply. Management has instructed you, an inventory cost
consultant, to advise them as to the most desired order quantities.
The factory closes for 4 weeks annual leave per annum.
You are given the following data:
Inventory usage rate: 125 per week, Lead time: 3 weeks
Unit price: $1.50, Annual requirement: 6,000 units
Order cost: $9.00 per order, Carrying cost: $0.30...

Economic Order Quantity
Ottis, Inc., uses 731,025 plastic housing units each year in its
production of paper shredders. The cost of placing an order is $30.
The cost of holding one unit of inventory for one year is $15.
Currently, Ottis places 171 orders of 4,275 plastic housing units
per year.
Required:
1. Compute the economic order quantity.
units 1,710
2. Compute the ordering, carrying, and total
costs for the EOQ.
Ordering cost
$__________
Carrying cost
12,825
Total cost
$__________...

(URGENT) PoMA annually consumes 10,000 units of component P. The
carrying cost of this component is Rs.2 per unit per year and the
ordering costs are Rs.100 per order. PoMA uses an order quantity of
500 units. The company operates 200 days per year, and the lead
time for ordering component P is 14 days. What is the re-order
point (in terms of units)?

Exercise 10-1 (from Text 15.24) Economic order
quantity
The calculation of an Economic Order Quantity uses a
formula which balances the cost of ordering stock (PER ORDER which
may include research, account handling, supplier meetings and
processing time AND if imported, import duties and customs
clearance fees etc.) against the UNIT cost of holding inventory
(these costs may include warehouse rent, insurance, storage costs
etc.). The EOQ is the point where the two costs are equally
balanced such that it...

A quantity discount of 10% in existing unit price is offered,
provided order and supply quantity is at least 500 units.
The following information is given:
Annual demand - 1000 numbers
Procurement cost per order - Rs 100
Inventory carrying cost per annum- 22% of the acquisition
cost
Existing unit price ( acquisition cost ) Rs 10
What will be the annual saving ( if any) if discount is availed
of, instead of ordering out as per EOQ based on...

URGENT
A, If EOQ of a company is 1,000 units, holding cost per unit per
year is Rs.10. What is total ordering
cost?
[2 Marks]
B, COMPANY annually consumes 10,000 units of component P. The
carrying cost of this component is Rs.2 per unit per year and the
ordering costs are Rs.100 per order. PoMA uses an order quantity of
500 units. The company operates 200 days per year, and the lead
time for ordering component P is 14 days....

A
company orders a particular raw material in order quantities of 250
units. No safety stack is held, the stock holding cost is GHc 3.00
per unit per annum and the annual demand of 2,500 units. What is
the total annual stock holding cost of the material?

Holding Cost
10
Order Cost (Per Order)
100
Order Quantity
130
Optimal Order Quantity
51.0
B) As stated in this case, if the products have to be ordered at
a minimum of amount of 130 units, how much should of the products
have to be ordered? Please explain your reasons either by
calculation or logical statements.
If Alex decides to order 130 units per time, he calculates that
the total cost will increase by 67%, which is obtained by
((3+1/3)/2)-1....

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