Net Steels is a steel manufacturing company. It currently orders 180 metric tons of raw material per order. It wasobserved that the company often faces stockout. To tackle this issue, the company incorporated a fixed-quantity system(FQS) and collected the following data.DemandOrder CostItem Cost12000 metric tons per year$16000 per order$35000 per year20 percent per yearInventory-Holding CostUsing the data to determine the EOQ. Only for non-integer results, round your answer UP to the nearest integer. Forexample, if your answer is 5.05, type 6; if your answer is 5, type 5.The formula is as follows.2DCOEconomic Order Quantity (EOQ), Q* =ChReorder point, r = demand rate x lead time = d LYour Answer:Answer

EOQ = √2DS/H D= Annual Demand S= Order Cost H = Holding Cost Demand = 12,000 × $35,000 =…

Using the data to determine the EOQ. Only for non-integer results, round your answer UP to the nearest integer. For example, if your answer is 5.05, type 6; if your answer is 5, type 5. The formula is as follows. 2DCO Economic Order Quantity (EOQ), Q* = Cn

Using the data to determine the EOQ. Only for non-integer results, round your answer UP to the nearest integer. For example, if your answer is 5.05, type 6; if your answer is 5, type 5. The formula is as follows. 2DCO Economic Order Quantity (EOQ), Q* = Cn

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

See similar textbooks

Similar questions

Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for 25 per unit. Each quarter, 2,000 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: No significant non-unit-level costs are incurred. Morrill is considering two alternatives to supply the productive capacity for the subassembly. 1. Lease the needed space and equipment at a cost of 27,000 per quarter for the space and 10,000 per quarter for a supervisor. There are no other fixed expenses. 2. Drop the thickness gauge. The equipment could be adapted with virtually no cost and the existing space utilized to produce the subassembly. The direct fixed expenses, including supervision, would be 38,000, 8,000 of which is depreciation on equipment. If the thickness gauge is dropped, sales of the density gauge will not be affected. Required: 1. Should Morrill Company make or buy the subassembly? If it makes the subassembly, which alternative should be chosen? Explain and provide supporting computations. 2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What effect does this have on the decision? 3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 2,800 subassemblies are required per quarter. As before, assume that there are no ending inventories of subassemblies and that all units produced are sold. Assume also that the per-unit sales price and variable costs are the same as in Requirement 1. Include the leasing alternative in your consideration. Now, what is the correct decision?
The following information is about xyz limited. The usual capacity is 40000 units per month. A number of 44000 units were produced at a variable cost of $10 per unit. Sales are nil. Fixed production overhead at normal capacity is OMR 100000 per month, or OMR 2.500 per unit. 8000 OMR in other recurring costs You must produce a financial statements under 1. Absorbing Spending. 2. Using excess as a price tool .
Stripe Company has been purchasing a component, Part Q, for P19.20 per unit. Stripe is currently operating at 70% of capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows: Direct materials P11.50 Direct labor 4.50 Variable factory overhead 1.12 Fixed factory overhead 3.15 Total P20.27 Should the company make or buy the component? Prepare a differential analysis report dated March 12 of the current year to support your answer.
Net Steels is a steel manufacturing company. It currently orders 180 metric tons of raw material per order. It was observed that the company often faces stockout. To tackle this issue, the company incorporated a fixed-quantity system (FQS) and collected the following data. The lead time is 2 weeks. Demand Order Cost Item Cost Inventory-Holding Cost 10000 metric tons per year $17000 per order $38000 per year 20 percent per year Assuming there are 50 weeks a year, determine the reorder point. Only for non-integer results, round your answer UP to the nearest integer. For example, if your answer is 5.05, type 6; if your answer is 5, type 5. 2DCO Economic Order Quantity (EOQ), Q* = Cn Reorder point, r = demand rate x lead time Your Answer: Answer
An organisation manufactures a single product. The following information with regard to the raw material needed in the production process is supplied to you: Normal delivery time: 2.5 weeks Maximum delivery time: 3.5 weeks Normal usage: 52 000 units per year Purchase price per unit: R8.50 Cost of placing an order: R18.00 Interest rate: 2% per year Storing cost per unit: R2.50 a). Calculate the safety stock b). Calculate the lead time c). Calculate the EOQ. d). Calculate the re-order point if the organisation does not keep safety stock. e). Calculate the re-order point if the organisation has a policy to keep safety stock. f). Calculate the safety stock that should be kept by the organisation.
An organisation manufactures a single product. The following information with regard to the raw material needed in the production process is supplied to you: Normal delivery time: 2.5 weeks Maximum delivery time: 3.5 weeks Normal usage: 52 000 units per year Purchase price per unit: R8.50 Cost of placing an order: R18.00 Interest rate: 2% per year Storing cost per unit: R2.50 a). Calculate the safety stock b). Calculate the lead time
The following information is available for SAN JOSE CORP.'s new product line: Sale price per unit Variable manufacturing cost per unit of production Total annual fixed manufacturing cost Variable administrative cost per unit Total annual fixed administrative expenses There was no inventory at the beginning of the year. Normal capacity is 12,500 units. During the year, 12,000 units were produced and 10,000 units were sold. REQUIREMENTS: (1) 6 P 30 8. 25,000 15,000 What is the cost of ending inventory under direct costing and absorption costing, respectively? (2) What is the net income under direct costing and absorption costing, respectively?
Benjamin Company had the following results of operations for the past year. Sales (17,600 units at $10.00) Variable costs Direct materials Direct labor Overhead Contribution margin Fixed costs Fixed overhead Fixed selling and administrative expenses Income $ 176,000 35,200 70,400 3,520 66,880 14,080 35,200 $ 17,600 A foreign company (whose sales will not affect Benjamin's market) offers to buy 4,400 units at $7.50 per unit. In addition to variable costs, selling these units would increase fixed overhead by $660 and fixed selling and administrative costs by $330 Assuming Benjamin has excess capacity and accepts the offer, its profits will:
Dambo Limited has prepared the following cost analysis for 6 months of trading.Sales (units) 2 500Price $ 1000 per unitMaterials costs $ 200 per unitLabour costs $150 per unitOther variable costs $150 per unitOverheads $1,000,000 for 6 months operationa) Determine the break-even quantity, and Break even in Rs b) Identify the firm's margin of safety in units for the period.c) Calculate the profit made during the period? d) How much units the company should sell if the company wants to make a profit of $ 500,000 for the next six months. ?
Yancey, Inc reports the following information Units produced Units sold Sales poce Direct materials Direct labor 520 units 520 units $150 per unit $40 per unit $30 per unit Variable manufacturing overhead Fixed manufacturing overhead $20 per unit $24,000 per year $15 per unit Variable selling and administrative costs Fixed selling and administrative costs $25,000 per year What is the amount of unit product cost that will be considered for external reporting purposes? (Round any intermediate calculations and your final answer to the nearest cent) OA. $76 15 OB 5136 15 OC. $116 15 OD $80.00
Exxarro Llimited is considering pricing and costing for the year ahead. The following data based on expected production and sales of 15 000 units are provided for analysis:Variable manufacturing costR1 185 000Fixed manufacturing costR510 000Sales commissionR5 per unit soldFixed administration costR130 000SalesR210 per unit Study the information provided above and answer the following questions independently:4.1 Calculate the break-even sales value. 4.2 Calculate the sales volume required to achieve a profit of R 800 000. 4.3 Suppose Exxaro Limited is considering a decrease of 10% per unit in the selling price of the product with the expectation that it would increase sales volume by 10%. Is this a good idea? Motivate your answer with relevant calculations.