ollins Corporation is a major manufacturer of food processors. It purchases motors from Campbell Corporation. Annual demand is 104,000 motors per year or 2,000 motors per week. The ordering cost is $100 per order. The annual carrying cost is $20.80 per motor. It currently takes 3 eeks to supply an order to the assembly plant. ead the requirements. equirement 1. What is the optimal number of motors that Collins's managers should order according to the EOQ model? egin selecting the formula used to calculate EOQ. (D= Demand in units for one year, P= Ordering cost per purchase order, C= Carrying cost of one unit in stock, Q= Any order quantity) 2DP The optimal number of motors per order is 1,000 motors. equirement 2. At what point should managers reorder the motors, assuming that both demand and purchase-order lead time are known with certainty? etermine the formula used to calculate the reorder point for reordering motors, then calculate the reorder point. Demand per week Purchasing lead time (wks) Reorder point 2,000 3 6,000 motors equirement 3. Now assume that demand can vary during the 3-week purchase-order lead time. The table shows the probability distribution of various demand levels. If Collins runs out of stock, it would have to rush order the motors at an additional cost of $1 per motor. How much safety ock should the assembly plant hold? How will this affect the reorder point and reorder quantity? he assembly plant should hold motors as safety stock because when this number of motors are held, Demand ne total stockout and carrying costs are the Total Demand for Motors for 3 Weeks Probability of Demand (sums to 1) 3,000 0.05 4,000 0.30 6,000 0.10 6,140 0.50
ollins Corporation is a major manufacturer of food processors. It purchases motors from Campbell Corporation. Annual demand is 104,000 motors per year or 2,000 motors per week. The ordering cost is $100 per order. The annual carrying cost is $20.80 per motor. It currently takes 3 eeks to supply an order to the assembly plant. ead the requirements. equirement 1. What is the optimal number of motors that Collins's managers should order according to the EOQ model? egin selecting the formula used to calculate EOQ. (D= Demand in units for one year, P= Ordering cost per purchase order, C= Carrying cost of one unit in stock, Q= Any order quantity) 2DP The optimal number of motors per order is 1,000 motors. equirement 2. At what point should managers reorder the motors, assuming that both demand and purchase-order lead time are known with certainty? etermine the formula used to calculate the reorder point for reordering motors, then calculate the reorder point. Demand per week Purchasing lead time (wks) Reorder point 2,000 3 6,000 motors equirement 3. Now assume that demand can vary during the 3-week purchase-order lead time. The table shows the probability distribution of various demand levels. If Collins runs out of stock, it would have to rush order the motors at an additional cost of $1 per motor. How much safety ock should the assembly plant hold? How will this affect the reorder point and reorder quantity? he assembly plant should hold motors as safety stock because when this number of motors are held, Demand ne total stockout and carrying costs are the Total Demand for Motors for 3 Weeks Probability of Demand (sums to 1) 3,000 0.05 4,000 0.30 6,000 0.10 6,140 0.50
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Hi, can someone answer this please?
Transcribed Image Text:Collins Corporation is a major manufacturer of food processors. It purchases motors from Campbell Corporation. Annual demand is 104,000 motors per year or 2,000 motors per week. The ordering cost is $100 per order. The annual carrying cost is $20.80 per motor. It currently takes 3
weeks to supply an order to the assembly plant.
Read the requirements.
.....
Requirement 1. What is the optimal number of motors that Collins's managers should order according to the EOQ model?
Begin by selecting the formula used to calculate EOQ. (D = Demand in units for one year, P = Ordering cost per purchase order, C = Carrying cost of one unit in stock, Q = Any order quantity)
2DP
EOQ =
The optimal number of motors per order is
1,000 motors.
Requirement 2. At what point should managers reorder the motors, assuming that both demand and purchase-order lead time are known with certainty?
Determine the formula used to calculate the reorder point for reordering motors, then calculate the reorder point.
Demand per week
Purchasing lead time (wks)
Reorder point
%3D
2,000
6,000 motors
%3D
Requirement 3. Now assume that demand can vary during the 3-week purchase-order lead time. The table shows the probability distribution of various demand levels. If Collins runs out of stock, it would have to rush order the motors at an additional cost of $1 per motor. How much safety
stock should the assembly plant hold? How will this affect the reorder point and reorder quantity?
The assembly plant should hold
motors as safety stock because when this number of motors are held,
Demand
the total stockout and carrying costs are the
Total Demand for Motors for 3 Weeks
Probability of Demand (sums to 1)
3,000
0.05
4,000
0.30
6,000
0.10
6,140
0.50
6,300
0.05
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education