Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Chapter 23, Problem 1P
a)
Summary Introduction
To determine: Economic order quality (EOQ).
b)
Summary Introduction
To determine: Maximum inventory
c)
Summary Introduction
To determine: Average inventory
d)
Summary Introduction
To determine: The number days to place the order.
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3. Aapki Humaari Beauty LLP requires 12000 units of Bear Shampoo annually as a part of its sales requirement, ordering one month usage at a time.
Each shampoo bottle costs Rs 100.The ordering cost per order is Rs 50 and the carrying cost of the average inventory on a yearly basis is 10%
You as an adviser to the company advise to buy the most economical order size.
a. The company looks forward for your advice on understanding the concept of economic order size.
b. Advise what should be desired quantity as per the economic purchase policy of the company and how much the company may save on account of ordering cost.
Note : You can round off any number to lower side for the calculation purpose
The annual demand for a particular chemical product is 1,200 units. Suppose that the annualholding cost is $24 per unit, and the ordering cost is $100.Part A: Find the optimal order quantity based on EOQ analysis, and calculate the combinedannual ordering and holding cost.Part B: Now suppose that the store manager finds out that the demand has been underestimated.Specifically, the correct annual demand is 1,500 units. On the other hand, due to operationalrestrictions she cannot change the order quantity and thus use the same order size from part A.How much this error cost the store? (This can also be considered as a penalty for parametermisestimation).
Ndapandula Investment CC sells about 12 000 bags of poulty grain per year. The Holding costs are N$ 50.00 per bag per year, and the Ordering costs are about N$ 100.00 per order. The Investment company operates 280 days per year.
Determine:
I. The optimal economic order quantity.
II. The total annual inventory costs
III. If the demand increases to 13 000 bags per year, what will the total annual inventory costs amount to?
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- A hardware store sells paint that has a demand of 9,706 gallons per year. The store purchases the paint from a supplier for 11.2 dollars per gallon The unit holding cost per year is 24 percent of the unit purchase cost. while the ordering cost is 175 dollars per order. The paint supplier has a lead time of 10 days. What is the annual ordering cost if the store uses the order quantity of 2,103 gallons per order? Assume EOQ model is appropriate. Use at least 4 decimal places.arrow_forward4. 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. Note: Kindly input your answer with comma. Example: 10,000 Required: a. Compute the economic order quantity. b. How many orders would be placed under the EOQ policy? c. Compute the annual ordering cost for the EOQ. d. Compute the annual carrying cost for the EOQ. e. Compute the total inventory-related cost at the EOQ.arrow_forward3. A large bakery buys sugar in 50-kg bags. The bakery uses an average of 1,344 bags a year. Preparing an order and receiving a shipment of sugar involves a cost of P135. Annual carrying costs are P 630 per bag. The bakery operates 280 days per year. Lead time = 2 weeks. a. Determine the economic order quantity. b. What is the average number of bags on hand? c. When should the bakery order for more sugar? d. How many times per year will the bakery order for sugar?arrow_forward
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- 2. 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. 219 S b. Calculate and interpret the optimal number of orders to be placed. the ida c. If it takes five days to receive an order from suppliers, at what inventory level should ABC Company place another order.Interpret.arrow_forwardA supplier sells MF Tires to dealers. The annual demand is approximately1,000 tires. The supplier pays P50 for each tire and estimates that the annualholding cost is 20 percent of the total value of tires. It costs approximatelyP25 to place an order. The supplier currently orders 80 tires per month.Required:a. Calculate ordering, holding, and total inventory costs for thecurrent ordered quantity.b. Determine the EOQ.c. How many orders will be placed per year using the EOQ?d. Calculate ordering, holding, and total inventory costs for the EOQand also determine the change in total inventory cost.arrow_forwardThe Metropolitan Book Company purchases paper from the Atlantic Paper Company. Metropolitan produces magazines and paperbacks that require 1,215,000 pounds of paper per year. The cost per order for the company is $1,200; the cost of holding 1 pound of paper in inventory is $0.08 per year. Determine the following. The economic order quantity The minimum total annual cost The optimal number of orders per year The optimal time between orders.arrow_forward
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