Question

McCartney Company produces a number of products and provides the following information: Annual demand for Product...

McCartney Company produces a number of products and provides the following information:

Annual demand for Product C 20,000
Cost of setting up to make Product C $45
Cost of carrying one unit of Product C in inventory $5

Currently, McCartney produces 1,000 units of Product C per production run.

Inventory-related cost for Product C under the current inventory policy is

a.$900.

b.$2,500.

c.$3,400.

d.$45,000.

e.$100,000.

The economic order quantity (EOQ) for Product C is

a.500.

b.600.

c.700.

d.800.

What is the total inventory-related cost at the EOQ?
(Note: Round the number of setups to the nearest whole number.)

a.$1,500

b.$3,330

c.$2,985

d.$3,400

e.$5,000

e.1,000.

Business   Accounting   
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Homework Answers

Answer #1
Q1.
Answer is c. 3400
Explanation:
Setting up cost =20000/1000 *45 = 900
Carrying cost =1000/2* 5=2500
Total Inventory cost =900+2500 = 3400
Q2.
Answer is b. 600
Explanation:
Annual demand =20000
Setting up = 45 per setup
Carrying cst = 5 per unit
EOQ = (2*20000*45/5)^2= 600
Q3.
Answer is c. 2985
Explanation:
Setting up cost =20000/600 =33 setup= 33*45 = 1485
Carrying cost = 600/2*5=1500
Total invenntory cost = 1485+1500=2985
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