Bond carries a part that is popular in the manufacture of automatic sprayers. Demand for this part is 4,000 units per year; order costs amount to P30 per order, and holding costs total P1.50 per unit. Bond currently places four orders per year with its suppliers. Management is considering the implementation of an economic order quantity model in an effort to better manage its inventories. Compute total annual inventory costs if Bond follows the EOQ policy.

Bond carries a part that is popular in the manufacture of automatic sprayers. Demand for this part is 4,000 units per year; order costs amount to P30 per order, and holding costs total P1.50 per unit. Bond currently places four orders per year with its suppliers. Management is considering the implementation of an economic order quantity model in an effort to better manage its inventories. Compute total annual inventory costs if Bond follows the EOQ policy.

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 6E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. 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?
Auto Zone purchases replacement brake fluid reservoirs directly from the manufacturer. Demand is roughly 1000 units per month over the year. Ordering costs are $25 per order and the reservoirs are $10.00 per unit. Annual holding costs are 20% of the value of the inventory. There are 311 working days per year and the lead time is 5 days. Address the following inventory management issues that need to be resolved. a) What is the EOQ for this component? b) What is the reorder point? c) What is the cycle time? d) What are the total annual holding and ordering costs associated with your recommended EOQ?
Dream Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Howe anticipates sales of 126,000 units per year, an ordering cost of P4 per order, and carrying costs of P1.008 per unit. The following year, the company learns it can reduce ordering costs to P1 per order but that carrying costs will stay the same at P1.008 per unit. What is the total cost of inventory to be expected?
Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 60,500 units per year, an ordering cost of $12 per order, and carrying costs of $1.20 per unit.a. What is the economic ordering quantity?___________Units b. How many orders will be placed during the year? __________Orders c. What will the average inventory be? ____________Units d. What is the total cost of ordering and carrying inventory? $____________
A. Genesis Company is a wholesaler. It purchases 60,000 units of Product X per month for sale to retailers. The cost of placing an order is P100. The cost of holding one unit of inventory for one year is P4. Required: 1. Compute the economic order quantity. 2. How many orders would be placed under the EOQ policy? 3. Compute the annual ordering cost for the EOQ. 4. Compute the annual carrying cost for the EOQ. 5. Compute the total inventory-related cost at the EOQ. 6. Previously, the company had been purchasing 5,000 units of product X per order: What is the ordering cost per year under the previous policy? ii. The annual carrying cost? iii. How much money does the company save over the policy of purchasing 5,000 units per order using the EOQ policy? i. B. Kings Company presents the following information: 1. Annual credit sales: P 25,200,000 2. Collection period: 3 months 3. Rate of return: 12% Kings company considers changing its credit term from n/30 to 3/10, 1/30. The following are…
Given: Peter Piper has projected sales of 72,000 pipes this year, ordering cost of P6 per order, and carrying costs of P2.40 per pipe. With the given data, can you give me the solution on how to get: -What is the economic ordering quantity? -Total inventory cost at EOQ -How many orders will be placed during the year?-What will the average inventory be? Thank you in advance.
Assume Wyteboard Corp. markers uses 1,440,000 gallons of ink each year. Assume Palmer will order the ink at a rate of P2 per gallon plus a fixed cost of P100 per order. At cost, the firm's carrying cost is 20% of the inventory value. What is Wyteboard's minimum costs of ordering and holding inventory? SHOW THE ANSWER IN A GOOD ACCOUNTING FORM
The monthly demand of GHI's sole product is 30,000 cases. Based on data analysis, the carrying cost per case is P30 per year. For each order, ABC spends an average of P200 in worker's wages, P700 in freight and P560 in other expenses. If ABC would like follow the EOQ model but also maintain a safety stock of 10,000 cases, how much would the total annual inventory-related costs be?
The ABC co.is planning to stock new product. The ABC co.has developed thefollowing information:Annual usage = 5400 unitsCost of the product = 365 MU/unitOrdering cost = 55 MU/orderCarrying cost = 28%/year of inventory value helda) Determine the optimal number of units per order?b) Find the optimal number of orders/year?c) Find the annual total inventory cost? Please mention formulas and do it in detail so I can understand.
Princeton GI Roofing Ltd wants to reduce its total inventory cost using the appropriate EOQ model. Currently, it orders 2170 thick gauge roofing sheets per batch. Annual demand is projected to be 43420 sheets. The ordering cost is Php 120. The average carrying cost is equivalent to 20% of the unit acquisition price of Php 400. Lead time is three days. Assume a 365 day year. Answer the following:g. Based on its current practice, how many times does it order in a year? Express your answer up to the hundredths place (two decimal places). h. Based on its current practice, what is its average inventory level? Express your answer up to the nearest integer or whole number.i. Based on its current practice, what is the company's total annual inventory cost? Express your answer up to the nearest centavo.
‏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 . b . Calculate and interpret the optimal number of orders to be placed. c. If it takes five days to receive an order from suppliers, at what inventory level should ABC Company place another order? Interpret .
Mona PLC is a Zambian well-known company that sells goods locally within Zambia. The recently appointed Management Accountant of Mona PLC has been studying the working capital management of the company and has congregated the following information: Inventory management the current policy is to order 100,000 units when the inventory level reduces to 35,000 units. Prediction demand to meet production requirements during the next year is 625,000 units. The cost of placing and processing an order is K250, while the cost of holding a unit in stores is K0.50 per unit per year. Both costs are expected to be constant during the next year. Orders are received two weeks after being placed with the supplier. You should assume a 50- week year and that demand is constant throughout the year. Accounts receivable management Local customers are allowed 30 days’ credit, but the financial statements of Mona PLC shows that the average accounts receivables period in the last financial year was 75 days.…