Wesley Utility Company uses 2,500 units per year which it stores at $0.50 per unit per annum. The cost to place an order is $100. a) Calculate: i. The economic order quantity (EOQ) b) If the company decides to make the items on its own machine with a potential capacity of 5,000 units per year, calculate: i. The economic order quantity (EOQ) ii. The annual ordering cost iii. The annual carrying cost

Wesley Utility Company uses 2,500 units per year which it stores at $0.50 per unit per annum. The cost to place an order is $100. a) Calculate: i. The economic order quantity (EOQ) b) If the company decides to make the items on its own machine with a potential capacity of 5,000 units per year, calculate: i. The economic order quantity (EOQ) ii. The annual ordering cost iii. The annual carrying cost

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 8E: Melchar Company uses 78,125 pounds of oats each year. The cost of placing an order is 18, and the...

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Ottis, Inc., uses 640,000 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 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
Melchar Company uses 78,125 pounds of oats each year. The cost of placing an order is 18, and the carrying cost for one pound of oats is 0.45. Required: 1. Compute the economic order quantity for oats. 2. Compute the carrying and ordering costs for the EOQ.
Answer the following short problems: 1. Wergas, Inc. has determined the following for a given year: Economic order quantity Total cost to place purchase orders for the year Cost to place one purchase order Cost to carry one unit for 1 year What is Wergas' estimated annual usage in units? 5,000 units P 10,000 P 50 P4 2. Alilio Company is planning to build a new plant in Batangas City. The plant is expected to provide additional sales as follows: First Year Second Year Third Year P 2.0 million P2.5 million P 3.0 million (maximum capacity) The financial manager of Alilio estimates that for every peso of sales, P0.25 must be invested in current as sets. If all discounts are taken and bills are paid on time, accounts payable average P 0.04 per peso of sales. Other current liabilities, such as wages payable, typically average P0.05 per peso of sales. Required: a. Estimate the working capital investments required for the new plant in the l", 2nd & 3rd year of operations. b. How do these…
A company has estimated its economic order quantity for Part A at 2,400 units for the coming year. The ordering costs are P200 and carrying costs are P.50 per unit per year. What is the estimated total annual usage?
2. Find out the EOQ, Annual ordering cost and annual holding cost from the following information. The demand is 19500 units per year, holding cost is RO 4 per unit for a year and ordering cost is RO 25 order. 3. Find out the ordering cost from the following information, Annual demand is 240 units, holding cost RO 4 per unit for a year and EOQ is 60 units. 4. If the price of the material is RO 15 per unit and the annual consumption is 4000 units, the interest and store keeping charges are 20% of the value and the cost of placing of an order and receiving the goods is RO 60, how much material should be ordered at one time? 5. Alexander pump LLC uses about 75000 valves per year and the usage is fairly constant at 6250 units per month. The valve cost of RO 1.50 per unit when bought in large quantities, and the carrying cost is estimated to be 20% of average inventory investment on an annual basis. The cost to place an order and process the delivery is RO18. It takes 45 days to receive…
The annual demand for a certain product is 11,340 units. The company informs you that every time an order is placed for this product the cost per order incurred is £100. You are also told that the cost of holding one unit fora year is £0.7. What is the economic order quantity of the product?
2. The ABC Company consumes inventory of 67,500 units of components per year. The carrying cost per unit is RO 1.50. The fixed order cost is RO 25 per order. The production planning is 365-day year. a. What is the Economic Order Quantity (EOQ)? Interpret. 219 S b. Calculate and interpret the optimal number of orders to be placed. the ida c. If it takes five days to receive an order from suppliers, at what inventory level should ABC Company place another order.Interpret.
Answer the following short problems: Wergas, Inc. has determined the following for a given year: Economic order quantity 5,000 units Total cost to place purchase orders for the year P 10,000 Cost to place one purchase order P 50 Cost to carry one unit for 1 year P 4 What is Wergas’ estimated annual usage in units? Alilio Company is planning to build a new plant in Batangas City. The plant is expected to provide additional sales as follows: First Year P 2.0 million Second Year P 2.5 million Third Year P 3.0 million (maximum capacity) The financial manager of Alilio estimates that for every peso of sales, P0.25 must be invested in current assets. If all discounts are taken and bills are paid on time, accounts payable average P 0.04 per peso of sales. Other current liabilities, such as wages payable, typically average P0.05 per peso of sales. Required: Estimate the working capital investments required for the new plant in the 1st, 2nd& 3rd year of operations. How…
Annual production of Product X is 400,000 annually. Each unit of Product X requires 2.5 units of material J. Product X is sold for 500 per unit and its total manufacturing cost is 300. Material J is purchased at 60 per unit. Carrying cost per unit of material J is 1 per unit while the ordering cost is 500 per order. How any units of material j shall the company order each time to minimize total relevant cost of inventories? a. 31,623 b. 20,000 c. 30,263 d. 26,336 e. None of these
Olive Corporation buys a material for P20 per unit Sixteen thousand parts a year are needed Carrying cost is P3.00 per unit and the ordering cost is P15 Compute the economic order quantity
2. MGS a manufacturing company placed an order of 24,000 units semiannually at a price of 20 per unit. Its carrying cost is 15% and the order cost is 12 per order. Compute the following:a) What is the most economical order quantity?b) How many orders need to be placed?
1. Calculate Economic Order Quantity (EOQ), number of orders, annual ordering costs, annual carrying costs and total inventory costs from the following: Annual consumption: 6000 units Carrying cost per unit: RO 2 Cost of placing one Order: RO 60 2. Find out the EOQ, Annual ordering cost and annual holding cost from the following information. The demand is 19500 units per year, holding cost is RO 4 per unit for a year and ordering cost is RO 25 order. 3. Find out the ordering cost from the following information, Annual demand is 240 units, holding cost RO 4 per unit for a year and EOQ is 60 units. 4. If the price of the material is RO 15 per unit and the annual consumption is 4000 units, the interest and store keeping charges are 20% of the value and the cost of placing of an order and receiving the goods is RO 60, how much material should be ordered at one time? 5. Alexander pump LLC uses about 75000 valves per year and the usage is fairly constant at 6250 units per month. The valve…