A company stocks an item that is consumed at the rate of 30 units each day. Every time an order is placed for new supply, $ 120 must be paid. A unit inventory held in stock for one week will cost $ 0.14. What is the economic order quantity (EOQ)?  What is the cycle time for the EOQ?  What is the total annual cost for the EOQ?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A company stocks an item that is consumed at the rate of 30 units each day. Every time an order is placed for new supply, $ 120 must be paid. A unit inventory held in stock for one week will cost $ 0.14.

  1. What is the economic order quantity (EOQ)? 
  2. What is the cycle time for the EOQ? 
  3. What is the total annual cost for the EOQ?
  4. What is the total annual cost if the order quantity is 200 more than EOQ?
  5. What is the optimum number of orders (rounded to the closest integer) that the company has to place each year?                              Assume that the company has a standing policy of not allowing shortages in demand.

 

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