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Lakeland Company produces and purchases 20,000 units each year at a cost of $80 per unit. Lakeland requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, and so on) is $4 per unit per year. The relevant ordering cost per purchase order is $400   Required 1- Calculate Lakeland’s EOQ. 2- Calculate the number of orders that will be placed each year. 3- Calculate Lakeland’s annual relevant ordering costs for the EOQ calculated in requirement 1

Lakeland Company produces and purchases 20,000 units each year at a cost of $80 per unit. Lakeland requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, and so on) is $4 per unit per year. The relevant ordering cost per purchase order is $400   Required 1- Calculate Lakeland’s EOQ. 2- Calculate the number of orders that will be placed each year. 3- Calculate Lakeland’s annual relevant ordering costs for the EOQ calculated in requirement 1

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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Lakeland Company produces and purchases 20,000 units each year at a cost of $80 per unit. Lakeland requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, and so on) is $4 per unit per year. The relevant ordering cost per purchase order is $400

 

Required

1- Calculate Lakeland’s EOQ.

2- Calculate the number of orders that will be placed each year.

3- Calculate Lakeland’s annual relevant ordering costs for the EOQ calculated in requirement 1

4- Calculate Lakeland’s annual relevant carrying costs for the EOQ calculated in requirement 1

5- Assume the purchase-order lead time is half a month. Calculate Lakeland’s reorder point

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