21-2. Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet whichsells blank and recorded DVDs. DVD Mart purchases DVDs from Globe at$28.00 per DVD; DVDs are shipped in packages of 68. Globe pays all incomingfreight, and DVD Mart does not inspect the DVDs due to Globe's reputation forhigh quality. Annual demand is 320,000 DVDs at a rate of 6,900 DVDs per week.DVD Mart earns 13% on its cash investments. The purchase-order lead time isone week. The following cost data are available:Relevant ordering costs per purchase order $119.50Carrying costs per package per year:Relevant insurance, materials handling,breakage, etc., per yearWhat is the economic order quantity (EOQ)?$5.50A) 67.41 packagesB) 47.14 packagesC) 6.10 packagesD) 66.67 packagesOAOBO COD

We calculate the Economic Order Quantity (EOQ) by using the EOQ formula:EOQ=H2DSWhere:• D = Demand…

Answered: 21-2. Globe Inc. is a distributor of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 7P

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Hicom Goods is a distributor of videotapes. View Mart is a local retail outlet which sells blank and recorded videos. View Mart purchases tapes from Hicom Goods at £3.00 per tape; tapes are shipped in packages of 20. Hicom Goods pays all incoming freight, and View Mart does not inspect the tapes due to Hicom Goods' reputation for high quality. Annual demand is 104,000 tapes at a rate of 4,000 tapes per week. View Mart earns 20% on its cash investments. The purchase-order lead time is two weeks. The following cost data are available: Relevant ordering costs per purchase order Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc., per year £90.50 £4.50 What is the required annual return on investment per package? a. £60.00 b. £2.50 C. £12.00 d. £0.60
A household appliance dealer buys refrigerators from a manufacturer and resells them to its customers. a.The manufacturer sets a list or catalogue price of $2,500 for a refrigerator. The manufacturer offers its dealers a 30 percent trade discount. b.The manufacturer sells the machine under terms of FOB destination. The cost of shipping is $240. c.The manufacturer offers a sales discount of 2/10, n/30. Sales discounts do not apply to shipping costs. What is the net cost of the refrigerator to the dealer, assuming it is paid for within 10 days of purchase?
6. The Woodmark Card Shop has a preinventory clearance sale on all cards. Cards that sell for 99¢ or more are marked down 20%. Cards marked less than 99¢ are marked down 10¢. What is the total sale price for four greeting cards that regularly sell for $1.15, $1.40, $.88, and $.79? 7. Wicker Book Store haS paperback books marked down 20%. What is the sale price of three books that regularly sellfor $4.95, $3.55, and $2.85?
The I-75 Carpet Discount Store has an annual demand of 10,000 yards of Super Shag carpet. The annual carrying cost for a yard of this carpet is $0.75, and the ordering cost is $150. The carpet manufacturer normally charges the store $8 per yard for the carpet; however, the manufacturer has offered a discount price of $6.50 per yard if the store will order 5,000 yards. How much should the store order, and what will be the total annual inventory cost for that order quantity?
Hult Games buys electronic components for manufacturing from two suppliers, Milan Components and Dundee Parts. If the components are delivered late, the shipment to the customer is delayed. Delayed shipments lead to contractual penalties that call for Hult to reimburse a portion of the purchase price to the customer. During the past quarter, the purchasing and delivery data for the two suppliers showed the following. Milan Dundee Total Total purchases (cartons) 91,000 39,000 130,000 Average purchase price (per carton) $ 22.00 $ 24 $ 22.60 Number of deliveries 60 40 100 Percentage of late deliveries 25 % 10 % 19 % The Accounting Department recorded $533,000 as the cost of late deliveries to customers. Required: Assume that the average quality, measured by the percentage of late deliveries, and prices from the two companies will continue as in the past. What is the effective price for components from the two companies…
Hult Games buys electronic components for manufacturing from two suppliers, Milan Components and Dundee Parts. If the components are delivered late, the shipment to the customer is delayed. Delayed shipments lead to contractual penalties that call for Hult to reimburse a portion of the purchase price to the customer. During the past quarter, the purchasing and delivery data for the two suppliers showed the following. Milan Dundee Total Total purchases (cartons) 98,000 42,000 140,000 Average purchase price (per carton) $ 20.00 $ 22 $ 20.60 Number of deliveries 80 20…
Home Entertainment is a small, family-owned business that purchases LCD televisions from a reputable manufacturer and sells them at the retail level. The televisions sell, on average, for $2,060 each. The average cost of a television from the manufacturer is $1,330. Home Entertainment has always kept careful accounting records, and the costs that it incurs in a typical month are as follows: Costs Cost Formula Selling: Advertising $ 1,090 per month Delivery of televisions $ 50 per television sold Sales salaries and commissions $ 3,040 per month, plus 5% of sales Utilities $ 404 per month Depreciation of sales facilities $ 3,160 per month Administrative: Executive salaries $ 11,500 per month Depreciation of office equipment $ 805 per month Clerical $ 1,860 per month, plus $49 per television sold Insurance $ 720 per month During April, the company sold and delivered 219…
1. The bookstore at State University purchases jackets sporting the school name and logo from a vendor. The vendor sells the jackets to the store for P1900 apiece. The cost to the bookstore for placing an order is P6000, and the carrying cost is 25% of the purchase price. The bookstore manager estimates that 1,700 jackets will be sold during the year. The vendor has offered the bookstore the following volume discount schedule: Order Size Discount % 12 to 299 300 to 499 2 500 to 799 4 800 and over The bookstore manager wants to determine the bookstore's optimal order quantity, given the foregoing quantity discount information.
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Big Toy, Inc. annually sells 115,000 units of Big Blobs. Currently, inventory is financed through the use of commercial bank loans. Big Toy pays $11.80 per Big Blob. The cost of carrying this inventory is $3.40 per unit while the cost of placing an order involves expenses of $500 per order. Since Big Blobs are imported, delivery is generally 25 days but may be as long as 30 days. To manage inventory more efficiently, the management of Big Toy, Inc. has decided to use the EOQ model plus a safety stock to determine inventory levels. What is the economic order quantity? Round your answer to the nearest whole number. units Today is January 1 and the current level of inventory is 11,500 units; when should the first order be placed based on the economic order quantity? Assume 365 days in a year. Round your answer to the nearest whole number. The first order based on the EOQ model would be placed on the th day. Management always wants sufficient Big Blobs so that they never are out…
Wholemark is an Internet order business that sells one popular New Year's greeting card once a year. The cost of the paper on which the card is printed is $0.05 per card, and the cost of printing is $0.15 per card. The company receives $2.15 per card sold. Since the cards have the current year printed on them, unsold cards have no salvage value. Its customers are from the four areas: Los Angeles, Santa Monica, Hollywood, and Pasadena. Based on past data, the number of customers from each of the four regions is normally distributed with a mean of 2,000 and a standard deviation 500. (Assume these four are independent.) What optimal production quantity for the card? is

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