Question

Rambo Ltd. orders 500 units at a time, and places 30 orders per year. Total ordering cost is $3,200 and total carrying cost is $2,500. Which of the following statements is true?

Total inventory-related cost is lower than it would be at the
economic order quantity (EOQ).

The economic order quantity (EOQ) is 500.

The economic order quantity (EOQ) is less than 500.

The economic order quantity (EOQ) is more than 500.

Answer #1

Question 3
EOQ, ORDERING COST, CARRYING COST, AND TOTAL INVENTORY
RELATED COST (LO 3)
Franklin Company purchases 4,500 units of Widgelets each year in
lots of 500 units per order. cost of placing one order is $22, and
the cost of carrying one unit of product in inventory for a year is
$8.80.
Required:
1 What is the EOQ for Widgelets?
2 How many orders for Widgelets will Franklin place per year
under the EOQ policy?
3 What is the...

16) For supply item ABC, Andrews Company has been ordering 125
units based on the recommendation of the salesperson who calls on
the company monthly. A new purchasing agent has been hired by the
company who wants to start using the economic-order-quantity method
and its supporting decision elements. She has gathered the
following information:
Annual demand in units
250
Days used per year
250
Lead time, in days
10
Ordering costs
$100
Annual unit carrying costs
$20
Required:
Determine the...

Oriole Ltd. uses 4,410 meters of fine gauge brass each year.
Brass wire costs $12 per meter, ordering costs are $44 per order,
and carrying costs are $2.20 per meter. Currently, Oriole orders
700 meters in each order. Is this the most economical order size?
If not, what is the economic order quantity? How much will Oriole
save using the EOQ? (Round answers to 2 decimal places,
e.g. 125.74.)
Economic order quantity=
meters
Oriole will save=
$
per year

Diagnostic Supplies has expected sales of 50,000 units per year,
carrying costs of $2 per unit, and an ordering cost of $5 per
order.
a. What is the economic ordering quantity?
b-1. What is the average inventory?
b-2. What is the total carrying cost?
Assume an additional 40 units of inventory will be required as
safety stock.
c-1. What will the new average inventory
be?
c-2. What will the new total carrying cost
be?

Alexis Company uses 800 units of a product per year on a
continuous basis. The product has a fixed cost of $50 per order,
and its carrying cost is $2 per unit per year. It takes 5 days to
receive a shipment after an order is placed. And the firm wishes to
hold 10 days usage in inventory as a safety stock Calculate the EOQ
Determine the average level of inventory. (Note: Use a 365 day year
to calculate daily...

Fisk Corporation is trying to improve its inventory control
system and has installed an on- line computer at its retail stores.
Details related to Fisk's purchasing are shown below.
Monthly expected purchases (in units) 8,000
Ordering costs (per order) $ 6.25
Carrying costs (per unit) $ 1.24 REQUIRED
a) What is the economic ordering quantity?
b) How many orders will be placed during the year?
c) What will the average inventory be?
d) What is the total cost of inventory...

A retailer purchases a certain type of chemical from a supplier
on the following quantity discount schedule: • If the order amount
is less than 100 kg.s, the supplier charges $30 per kg. • If the
order amount is at least 100 kg.s and less than 500 kg.s, the
supplier applies an incremental discount where the ﬁrst 100 kg.
costs $30 per kg. and the remaining amount costs $28 per kg. • If
the order amount is at least 500...

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...

Use the following information to answer the next question.
ABC Inc. is about to begin production on two homes in a new
housing subdivision. ABC anticipates that it will need 80,000
square feet of lumber over its 450 day construction cycle. Ordering
and holding costs are $6/order and $8/sq.ft., respectively. ABC's
turnaround time on a lumber order is 2 days.
1. How many units of lumber will ABC have in its
inventory at the end of the 3rd day of...

If at the end of the year, the cost of revenue = $2,500, total
revenue = $12,000 and inventory value = $2,000, the inventory
turnover ratio would be:
0.208
0.375
2.667
0.800
1.250
b)
Classify the following inventory items as either A, B, or C
items using the ABC inventory control system:
Item #
Annual Sales
Unit Cost
1
130 units
$ 4.00
2
400 units
15.30
3
25 units
17.00
4
1320 units...

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