Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Question
Chapter 20, Problem 20.17MCQ
To determine
Economic Order Quantity (EOQ):
Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.
To identify: The correct option
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Q.3.1 Gill Enterprises produces a number of consumer items, including a stove. A key
component of the stove is purchased from an outside supplier. In total, the company
purchases 2 500 components each year. It costs approximately R12 to place an order
and it costs R0.25 to carry one part in inventory for a year. The company is
operational for 50 weeks in a year.
Required:
Q.3.1.2
It takes about four weeks to receive an order of parts from the supplier.
The company normally uses 52 parts each week in production. However,
usage can be as high as 70 parts per week. Calculate the safety stock.
Calculate the reorder point with safety stock included.
An automobile parts supplier sell Excel brand batteries to van dealers. The annual demand is approximately 1,000 batteries. The supplier pays RO 20 for each battery and estimates that the annual holding cost is 30 percent of the battery’s value. It costs approximately RO 10 to place an order. The supplier currently orders 20 batteries per month. Determine the economic order quantity.
a.
57.74 units
b.
28.28 units
c.
28.82 units
d.
82.82 units
Figure 1
Mrs. Brown's Bagel Company manufactures specialty bagels. The company buys flour in
50-pound bags that cost GHS25 each. The company uses 10,000 bags per year, and usage occurs
evenly throughout the year.
The average cost to carry a 50-pound bag in inventory per year is GHS4, and the cost to place an
order is GHS10.
The company works 250 days per year.
20. Refer to Figure 1. If Brown's lead time is four working days, the average rate of usage is 40 bags
per day, and the company carries a safety stock of 20 bags, the reorder point would be
a. 180 bags.
b. 140 bags.
c. 160 bags.
d. 100 bags.
Chapter 20 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 20 - Why do better decisions regarding the purchasing...Ch. 20 - Name six cost categories that are important in...Ch. 20 - What assumptions are made when using the simplest...Ch. 20 - Give examples of costs included in annual carrying...Ch. 20 - Give three examples of opportunity costs that...Ch. 20 - What are the steps in computing the cost of a...Ch. 20 - Why might goal-congruence issues arise when...Ch. 20 - JIT purchasing has many benefits but also some...Ch. 20 - What are three factors causing reductions in the...Ch. 20 - You should always choose the supplier who offers...
Ch. 20 - Prob. 20.11QCh. 20 - What are the main features of JIT production, and...Ch. 20 - Distinguish inventory-costing systems using...Ch. 20 - Describe three different versions of backflush...Ch. 20 - Discuss the differences between lean accounting...Ch. 20 - The order size associated with the...Ch. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Lyle Co. has only one product line. For that line,...Ch. 20 - Just-in-time inventory assumes all of the...Ch. 20 - Economic order quantity for retailer. Wonder Line...Ch. 20 - Economic order quantity, effect of parameter...Ch. 20 - EOQ for a retailer. The Fabric World sells fabrics...Ch. 20 - EOQ for manufacturer. Sk8 Company produces...Ch. 20 - Sensitivity of EOQ to changes in relevant ordering...Ch. 20 - JIT production, relevant benefits, relevant costs....Ch. 20 - Backflush costing and JIT production. Grand...Ch. 20 - Backflush costing, two trigger points, materials...Ch. 20 - Backflush costing, two trigger points, completion...Ch. 20 - Prob. 20.30PCh. 20 - Prob. 20.31PCh. 20 - Prob. 20.32PCh. 20 - Prob. 20.33PCh. 20 - JIT purchasing, relevant benefits, relevant costs....Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Backflush costing and JIT production. The Acton...Ch. 20 - Backflush, two trigger points, materials purchase...Ch. 20 - Backflush, two trigger points, completion of...Ch. 20 - Lean accounting. Reliable Security Devices (RSD)...Ch. 20 - JIT production, relevant benefits, relevant costs,...
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