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...

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
$__________...

2. A service garage uses 8100 boxes of cleaning cloths a year.
Ordering cost is $30 and holding cost is $0.6 on an annual basis.
Please compute the following tasks using EOQ model. (a) The
economic order quantity based on EOQ model? (b) The total cost of
ordering and carrying? (c) Suppose the current order size is 500.
What additional annual cost is the company incurring by staying
with the order size 500?

XYZ purchases 20,000 unit of a product each year in lots of
1,000 units per order. The cost of placing an order is $20 and the
cost of carrying one unit of product in inventory is $30 per
year.
Required:
How many orders is placed per year?
What is the total ordering costs per year?
What is the total carrying cost of the inventory per year?
What is the total cost of carrying and ordering for the
year?
What is...

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...

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...

Apply the Concept
Reparan Corporation does warranty work for a major producer of
surface tablets. The following values apply for a part used in the
repair of the surface tablets (the part is purchased from external
suppliers):
D = 100,000 units
Q = 500 units
P = $80 per order
C = $4 per unit
Required:
1. Calculate the following:
Number of orders:
Ordering cost: $
Average inventory:
Carrying cost: $
Total inventory cost: $
2. Calculate the following:
EOQ...

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

The office manager for the Gotham Life Insurance Company orders
letterhead stationery from an office products firm in boxes of 500
sheets. The company uses 6,500 boxes per year. Annual carrying
costs are $3 per box, and ordering costs are $28. The following
discount price schedule is provided by the office supply company:
Order Quantity (in boxes) Price per Box 200-999 $16 1000-2999 14
3000-5999 13 6000+ 12 a. Determine the optimal order quantity and
the total annual inventory cost....

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...

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