Illustration 3- Economic Order QuantitySolution (EOQ)The Company is engaged in thesale of toys. The cost per order isPHP 1,000 and its carrying costper unit is PHP25. The Companyhas a demand of 50,000 units peryear. Determine the fT:Economic Order QuantityH1EOQ2,000units2.Number of Orders Per Year2 (50,000 units)(PHP 1,000)PHP 253.Total Ordering CostsAverage inventory4.5.Total Carrying CostsIllustration 3- Economic Order QuantityThe Company is engaged in thesale of toys. The cost per order isPHP 1,000 and its carrying costper unit is PHP25. The Companyhas a demand of 50,000 units peryear. Determine the ff:1.Solution( Number of Orders PerYear)No. of Orders Per Year- AnnualQuantity / EOQEOQNo. of Orders= 50,000 units/ 2,000units2.Number of Orders Per Year3.Total Ordering CostsNo. of Orders= 25 orders4.Average inventory5.Total Carrying CostsIllustration 3- Economic Order QuantityThe Company is engaged in thesale of toys. The cost per order isPHP 1,000 and its carrying costper unit is PHP25. The Companyhas a demand of 50,000 units peryear. Determine the ff:1.Solution( Total Ordering Costs)Total Ordering Costs= Cost perOrder x No. of OrdersTotal Ordering Costs= PHP 1,000x 25 ordersEOQ2.Number of Orders Per YearTotal Ordering Costs= PHP 25,0003.Total Ordering Costs4.Average inventoryTotal Carrying Costs5.Illustration 3- Economic Order QuantitySolution( Average Inventory)The Company is engaged in thesale of toys. The cost per order isPHP 1,000 and its carrying costper unit is PHP25. The Companyhas a demand of 50,000 units peryear. Determine the fr:Average Inventory= Order Size / 2Average Inventory= 2,000 orders/2Average Inventory= 1,0001.EOQ2.Number of Orders Per Year3.Total Ordering CostsAverage inventoryTotal Carrying Costs4.5. Illustration 3- Economic Order QuantityThe Company is engaged in thesale of toys. The cost per order isPHP 1,000 and its carrying costper unit is PHP25. The Companyhas a demand of 50,000 units peryear. Determine the ff:Solution( Total Carrying Costs)Total Carrying Costs= AverageInventory x Carrying Cost perOrderEOQTotal Carrying Costs= 1,000 xPHP 251.2.Number of Orders Per Year3.Total Ordering CostsTotal Carrying Costs= PHP 25,0004.Average inventory5.Total Carrying CostsEOQ in Table FormInstruction: Using the data in the previous example. Fill out the tablebelow.TotalOrderingTotalCarryingCost perUnitTotalOrderingNo. ofAverageOrder SizeCost/OrderingCarryingandOrdersInventoryOrderCostsCostsCarryingCosts4001,0001,2502,0002,5005,00010,000

Formulae used: Number of orders=Annual DemandOrder sizeTotal ordering costs=No. of orders×Ordering…

Illustration 3- Economic Order Quantity The Company is engaged in the sale of toys. The cost per order is PHP 1,000 and its carrying cost per unit is PHP25. The Company has a demand of 50,000 units per year. Determine the ff: Solution( Total Carrying Costs) Total Carrying Costs= Average Inventory x Carrying Cost per Order Total Carrying Costs= 1,000 x PHP 25 1. ЕOQ 2. Number of Orders Per Year 3. Total Ordering Costs Total Carrying Costs= PHP 25,000 4. Average inventory 5. Total Carrying Costs EOQ in Table Form Instruction: Using the data in the previous example. Fill out the table below. Total Ordering Total Carrying Cost per Total Ordering No. of Average Order Size Cost/ Ordering Carrying Costs and Orders Inventory Order Costs Unit Carrying Costs 400 1,000 1,250 2,000 2,500 5,000 10,000

Illustration 3- Economic Order Quantity The Company is engaged in the sale of toys. The cost per order is PHP 1,000 and its carrying cost per unit is PHP25. The Company has a demand of 50,000 units per year. Determine the ff: Solution( Total Carrying Costs) Total Carrying Costs= Average Inventory x Carrying Cost per Order Total Carrying Costs= 1,000 x PHP 25 1. ЕOQ 2. Number of Orders Per Year 3. Total Ordering Costs Total Carrying Costs= PHP 25,000 4. Average inventory 5. Total Carrying Costs EOQ in Table Form Instruction: Using the data in the previous example. Fill out the table below. Total Ordering Total Carrying Cost per Total Ordering No. of Average Order Size Cost/ Ordering Carrying Costs and Orders Inventory Order Costs Unit Carrying Costs 400 1,000 1,250 2,000 2,500 5,000 10,000

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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