(a) One Cycle Limited (OCL) is a manufacturer of sports bicycles. The company uses Pirelli-P44X tyres in its sports bicycles. The following information is provided in relation to Pirelli-P44X tyres for the year 2021. V The annual demand for Pirelli-P44X tyres is 400,000 tyres. V The ordering cost per order is Kshs 10,500. V The Holding cost per unit of Pirelli-P44X tyre is Shs 158. Required; i) Calculate the Economic order Quantity (EOQ) for the Pirelli-P44X tyres using the information provided above
(a) One Cycle Limited (OCL) is a manufacturer of sports bicycles. The company uses Pirelli-P44X tyres in its sports bicycles. The following information is provided in relation to Pirelli-P44X tyres for the year 2021. V The annual demand for Pirelli-P44X tyres is 400,000 tyres. V The ordering cost per order is Kshs 10,500. V The Holding cost per unit of Pirelli-P44X tyre is Shs 158. Required; i) Calculate the Economic order Quantity (EOQ) for the Pirelli-P44X tyres using the information provided above
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer all the required questions and kindly make sure the values are correct and the formula you use is also correct. Thanks in advance!
Transcribed Image Text:(a) One Cycle Limited (OCL) is a manufacturer of sports bicycles. The company uses Pirelli-P44X
tyres in its sports bicycles. The following information is provided in relation to Pirelli-P44X
tyres for the year 2021.
V The annual demand for Pirelli-P44X tyres is 400,000 tyres.
V The ordering cost per order is Kshs 10,500.
V The Holding cost per unit of Pirelli-P44X tyre is Shs 158.
Required;
i) Calculate the Economic order Quantity (EOQ) for the Pirelli-P44X tyres using the
information provided above
Page 1 of 5
ii) Calculate the total ordering cost and the total holding cost if the reorder quantity is as per
the EOQ computed in (i) above.
iii) Explain the trade-off that occurs between the ordering cost and the holding cost as the
order quantity increases
iv) Explain two assumptions of the Economic order Quantity (EOQ) _
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