Pro Hockey Store is evaluating two supplies of hockey skates: JA skates and Power skates. Pertinent information about each potential supplier follows: Relevant Item JA Skates Power Skates Purchase Price $50.00 $51.20 Ordering cost per order $8.00 $8.00 Carrying cost per year 20% of Purchase price 5% of Purchase price Inspection cost per unit $0.02 $0.00 Insurance, material handling, and so on per unit per year $3.00 $3.50 Annual Demand 12,000 12,000 Average quantity of inventory held during the year 120 units 120 units Required Return on investment 10% 10% Stockout cost per unit $34 $22 Stockout units per year 350 65 Customer Returns 300 25 Customer-return costs per unit $45 $45 a. Calculate the EOQ for both suppliers b. Calculate the relevant costs of purchasing (1) JA Skates and (2) Power Skates. From where should Pro Hockey buy skates ?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Pro Hockey Store is evaluating two supplies of hockey skates: JA skates and Power skates. Pertinent information about each potential supplier follows: Relevant Item JA Skates Power Skates Purchase Price $50.00 $51.20 Ordering cost per order $8.00 $8.00 Carrying cost per year 20% of Purchase price 5% of Purchase price Inspection cost per unit $0.02 $0.00 Insurance, material handling, and so on per unit per year $3.00 $3.50 Annual Demand 12,000 12,000 Average quantity of inventory held during the year 120 units 120 units Required Return on investment 10% 10% Stockout cost per unit $34 $22 Stockout units per year 350 65 Customer Returns 300 25 Customer-return costs per unit $45 $45 a. Calculate the EOQ for both suppliers b. Calculate the relevant costs of purchasing (1) JA Skates and (2) Power Skates. From where should Pro Hockey buy skates ?
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