A manufacturing company uses 40,000 kilograms of a raw material evenly over a period. Thematerial is purchased at RM2.50 per kilogram. The cost of placing an order is RM120 and thecost of holding 1 kilogram of inventory for the period is 15% of the purchase costs.Required:a. Calculate the economic order quantity (EOQ).b. Calculate the total holding of the raw material in the period if the order quantity is 6,000kilograms and the buffer inventory is 2,000 kilograms.

solution given annual usage =40,000 kilogram ordering cost per order =RM 120…

logr aterial is purchased at RM2.50 per kilogram. The cost of placing an order is ost of holding 1 kilogram of inventory for the period is 15% of the purchase equired: Calculate the economic order quantity (EOQ). Calculate the total holding of the raw material in the period if the order

logr aterial is purchased at RM2.50 per kilogram. The cost of placing an order is ost of holding 1 kilogram of inventory for the period is 15% of the purchase equired: Calculate the economic order quantity (EOQ). Calculate the total holding of the raw material in the period if the order

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 8E: Melchar Company uses 78,125 pounds of oats each year. The cost of placing an order is 18, and the...

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