Henderson Drapes Ltd uses 960,000 meters of fabric each year for production. The company orders fabric at a cost of $3 per meter, plus fixed ordering costs of $150 per order. The carrying cost is 15% of the inventory value at cost. Assume a 365-day year for this company. What is the company's estimated EOQ?

Henderson Drapes Ltd uses 960,000 meters of fabric each year for production. The company orders fabric at a cost of $3 per meter, plus fixed ordering costs of $150 per order. The carrying cost is 15% of the inventory value at cost. Assume a 365-day year for this company. What is the company's estimated EOQ?

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 6E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Assume Palmer Corp. markers uses 1,440,000 gallons of ink each year. Assume Palmer will order the ink at a rate of P2 per gallon plus a fixed cost of P100 per order. At cost, the firm's carrying cost is 20% of the inventory value. What is Palmer's minimum costs of ordering and holding inventory?
TS Co has daily demand for ball bearings of 40 a day for each of the 250 working days (50 weeks) of the year. The ball bearings are purchased from a local supplier for $2 each. The cost of placing an order is $64 per order, regardless of the size of the order. The inventory holding costs, expressed as a percentage of inventory purchase price, is 25% per annum. What is the economic order quantity?
A company wishes to establish an EOQ for an item for which the annual demandis $800,000, the ordering cost is $32, and the cost of carrying inventory is 20%.Calculate the following:a. The EOQ in dollars.b. Number of orders per year.c. Cost of ordering, cost of carrying inventory, and total cost.d. How do the costs of carrying inventory compare with the costs of ordering?
Tiger Corporation purchases 1,400,000 units per year of one component. The fixed cost per order is $55. The annual carrying cost of the item is 27% of its $10 cost. Determine the EOQ if (1) the conditions stated above hold, (2) the order cost is $1 rather than $55, and (3) the order cost is $55 but the carrying cost is $0.01. What do your answers illustrate about the EOQ model? Explain.
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