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er, the minimum order size is 250 units; Webster's annual usage forecast is 5,000 units; and the annual carrying cost of this item is estimated to be 20 percent of the average inventory unit cost. Andria plans to begin her session with the senior executives by reviewing some basic inventory concepts, after which she will apply the EOQ model to Webster's microchip inventory. Question: Would the minimum order size of 250 units be the most beneficial

er, the minimum order size is 250 units; Webster's annual usage forecast is 5,000 units; and the annual carrying cost of this item is estimated to be 20 percent of the average inventory unit cost. Andria plans to begin her session with the senior executives by reviewing some basic inventory concepts, after which she will apply the EOQ model to Webster's microchip inventory. Question: Would the minimum order size of 250 units be the most beneficial

FINANCIAL ACCOUNTING
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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Andria Mullins, financial manager of Webster Electronics, has been asked by the firm's CEO, Fred Weygandt, to evaluate the company's inventory control techniques and to lead a discussion of the subject with the senior executives. Andria plans to use as an example one of Webster's "big ticket" items, a customized computer microchip which the firm uses in its laptop computer. Each chip costs Webster P200, and in addition it must pay its supplier a P1,000 fee on each order. Further, the minimum order size is 250 units; Webster's annual usage forecast is 5,000 units; and the annual carrying cost of this item is estimated to be 20 percent of the average inventory unit cost. Andria plans to begin her session with the senior executives by reviewing some basic inventory concepts, after which she will apply the EOQ model to Webster's microchip inventory.

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Would the minimum order size of 250 units be the most beneficial quantity the company must order?

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