A company annually consumes 10,000 units of Part C. The carrying cost of this part is P2 per year and the ordering costs are P100. The company uses an order quantity of 500 units. If the company operates 200 days per year, and the lead time for ordering Part C is 5 days.

A company annually consumes 10,000 units of Part C. The carrying cost of this part is P2 per year and the ordering costs are P100. The company uses an order quantity of 500 units. If the company operates 200 days per year, and the lead time for ordering Part C is 5 days.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

How many should the company order per batch so that it can minimize its costs of carrying and ordering costs?

A company annually consumes 10,000 units of Part C.
The carrying cost of this part is P2 per year and the
ordering costs are P100. The company uses an order
quantity of 500 units. If the company operates 200
days per year, and the lead time for ordering Part C is
5 days.

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