Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Home Depot Pleasanton Gardening Center needs to determine the ordering policy in the ERP system for a new retaining wall blocks. The demand forecast for the new blocks is about 1,000 units annually. To help you get a handle on the carrying and ordering costs, accounting department has given you the list of last year’s spending within warehouse and purchasing division.

COST ITEM

COST ($)

COST ITEM

COST ($)

Taxes for the warehouse

2,000

Warehouse supplies

280

Receiving and incoming inspection

1,500

Research and development

2,750

New product development

2,500

Purchasing salaries & wages

30,000

Acct. Dept. costs to pay invoices

500

Warehouse salaries & wages

12,800

Inventory insurance

600

Pilferage of inventory

800

Product advertising

800

Purchase order supplies

500

Spoilage

750

Inventory obsolescence

300

Sending purchasing orders

800

Purchasing Dept. overhead

1,000

Accounting department also told you that these data were compiled for handling 100,000 variety of inventory units that were carried or held during the year. You have also aware that 2000 orders were placed last year. Your job as a supervisor of supply analytics is to determine the economic order quantity (EOQ), ordering frequency per year, total ordering cost, and total inventory carrying cost, for this new product.

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