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Machine Operator, manufacturer of shelving keeps stock of a wide range of components.   The following data, you have established that: The cost to hold one unit for one year is $1.60. The cost of placing an order is $70.00.   Lead Time: The supplier takes from one to two weeks to deliver goods ordered. Maximum 2 Weeks Minimum 1 Week    The annual demand is 50,000 units Maximum usage5,000 usage Minimum usage 2,000 units Required: (a) On the basis of the above information, calculate for component B:  (i) The minimum stock level (ii) The reorder level (iii) The EOQ (iv) The maximum stock level

Machine Operator, manufacturer of shelving keeps stock of a wide range of components.   The following data, you have established that: The cost to hold one unit for one year is $1.60. The cost of placing an order is $70.00.   Lead Time: The supplier takes from one to two weeks to deliver goods ordered. Maximum 2 Weeks Minimum 1 Week    The annual demand is 50,000 units Maximum usage5,000 usage Minimum usage 2,000 units Required: (a) On the basis of the above information, calculate for component B:  (i) The minimum stock level (ii) The reorder level (iii) The EOQ (iv) The maximum stock level

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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Machine Operator, manufacturer of shelving keeps stock of a wide range of components.

 

The following data, you have established that:

  • The cost to hold one unit for one year is $1.60.
  • The cost of placing an order is $70.00.

 

Lead Time: The supplier takes from one to two weeks to deliver goods ordered.

  • Maximum 2 Weeks
  • Minimum 1 Week

 

 The annual demand is 50,000 units

  • Maximum usage5,000 usage
  • Minimum usage 2,000 units

Required:

(a) On the basis of the above information, calculate for component B:

 (i) The minimum stock level

(ii) The reorder level

(iii) The EOQ

(iv) The maximum stock level

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