Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 20, Problem 8E
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.
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Students have asked these similar questions
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…
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
Malburn Construction Ltd. Manufactures and distributes window frames. The company uses 600,000metal strips in producing the frames for the year. Each strip cost $15, the storage cost is 10% of the costprice and $180 is required to make an order.(i). Find the order size Malburn Construction needs to minimize its inventory costs.
Calculate for the company:(ii). the number of orders placed per year.
(iii).the length of the stock cycle in days.
(iv). the annual ordering cost
(v). the annual holding cost
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Chapter 20 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 20 - What are ordering costs? What are setup costs?...Ch. 20 - Explain why, in the traditional view of inventory,...Ch. 20 - Discuss the traditional reasons for carrying...Ch. 20 - Prob. 4DQCh. 20 - Explain how safety stock is used to deal with...Ch. 20 - Prob. 6DQCh. 20 - What approach does JIT take to minimize total...Ch. 20 - One reason for inventory is to prevent shutdowns....Ch. 20 - Prob. 9DQCh. 20 - Explain how long-term contractual relationships...
Ch. 20 - What is a constraint? An internal constraint? An...Ch. 20 - Prob. 12DQCh. 20 - Prob. 13DQCh. 20 - Explain how lowering inventory produces better...Ch. 20 - Prob. 15DQCh. 20 - Thomas Corporation produces heating units. The...Ch. 20 - Sterling Corporation has an EOQ of 5,000 units....Ch. 20 - Patz Company produces two types of machine parts:...Ch. 20 - Prob. 4CECh. 20 - See Cornerstone Exercise 20.4. Fisher Company has...Ch. 20 - Ottis, Inc., uses 640,000 plastic housing units...Ch. 20 - Ottis, Inc., uses 640,000 plastic housing units...Ch. 20 - Melchar Company uses 78,125 pounds of oats each...Ch. 20 - Prob. 9ECh. 20 - Morrison Manufacturing produces casings for sewing...Ch. 20 - Morrison Manufacturing produces casings for sewing...Ch. 20 - Refer to Exercise 20.10. Assume the economic lot...Ch. 20 - Eyring Manufacturing produces a component used in...Ch. 20 - Hales Company produces a product that requires two...Ch. 20 - Many companies have viewed JIT as a panaceaa...Ch. 20 - Prob. 16ECh. 20 - Prob. 17ECh. 20 - Which of the following describes the economic...Ch. 20 - The economic order quantity (EOQ) for Part X15 is...Ch. 20 - A JIT inventory management system maintains which...Ch. 20 - For the theory of constraints, which of the...Ch. 20 - A dedicated pharmaceutical plant uses the theory...Ch. 20 - Prob. 23PCh. 20 - Burnett Company produces two types of gears: Model...Ch. 20 - Taylor Company produces two industrial cleansers...Ch. 20 - Prob. 26PCh. 20 - Calen Company manufactures and sells three...Ch. 20 - Confer Company produces two different metal...Ch. 20 - Pratt Company produces two replacement parts for a...Ch. 20 - Bountiful Manufacturing produces two types of bike...
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