Do fast and step by step calculation for this general accounting question Joanie Fabrics makes custom purses and uses 800 yardsof fabric per year. The fabric used for the purses has afixed cost of $50 per order, a carrying cost of $2 per yardper year. When they place an order, it takes 5 days beforethe shipment is received. Joanie likes to keep 10 daysusage in inventory as her safety stock because hercustomers would be very upset if she runs out of theirfavorite purses. What is the EOQ? What is the averagelevel of inventory? (365 day year) What is the reorderpoint?

Step 1:- Introduction to the Economic Order QuantityEconomic order quantity (EOQ) addresses a firm's…

Answered: Joanie Fabrics makes custom purses and…

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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Problem Solving: Lila Battle has determined that the annual demand for number 6 screws is 100,000 screws. Lila, who works in her brother’s hardware store, is in charge of purchasing. She estimates that it costs $10 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, and so on. Furthermore, she estimates that the cost of carrying one screw in inventory for a year is one-half of 1 cent. Assume that the demand is constant throughout the year. a. How many number 6 screws should Lila order at a time if she wishes to minimize total inventory cost? b. How many orders per year would be placed? What would the annual ordering cost be? c. What would the average inventory be? What would the annual holding cost be?
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