PROBLEM 2The Strawberry Bread Company buys and then sells (as bread) 2.6 million bushels of wheat anmually. The wheat mustbe purchased in multiples of 2,000 bushels. Ordering costs, which include grain elevator removal charges of P3,500,are P5,000 per order. Annual carrying costs are 2 percent of the purchase price of PS per bushel. The companymaintains a safety stock of 200,000 bushels. The delivery time is 6 weeks.REQUIRED1. What is the EOQ?2. At what inventory level should an order be placed to prevent having to draw on the safety stock?3. What are the total inventory costs, including the costs of carrying the safety stock?4. The wheat processor agrees to pay the elevator removal charges if Strawberry Bread will purchase wheat inquantities of 650,000 bushels. Would it be to Strawberry Bread s advantage to order under this alternative?

Economic order quantity is the quantity at which the inventory should order where both ordering and…

PROBLEM 2 The Strawberry Bread Company buys and then sells (as bread) 2.6 million bushels of wheat anmuallly. The wheat must me purchased in multiples of 2,000 bushels. Ordering costs, which include grain elevator removal charges of P3,500, re P5,000 per order. Annual carrying costs are 2 percent of the purchase price of PS per bushel. The company naintains a safety stock of 200,000 bushels. The delivery time is 6 weeks. EQUIRED: 1. What is the EOQ? 2. At what inventory level should an order be placed to prevent having to draw on the safety stock? 3. What are the total inventory costs, including the costs of carrying the safety stock? 4. The wheat processor agrees to pay the elevator removal charges if Strawberry Bread will purchase wheat in quantities of 650,000 bushels. Would it be to Strawberry Bread's advantage to order under this altemative?

PROBLEM 2 The Strawberry Bread Company buys and then sells (as bread) 2.6 million bushels of wheat anmuallly. The wheat must me purchased in multiples of 2,000 bushels. Ordering costs, which include grain elevator removal charges of P3,500, re P5,000 per order. Annual carrying costs are 2 percent of the purchase price of PS per bushel. The company naintains a safety stock of 200,000 bushels. The delivery time is 6 weeks. EQUIRED: 1. What is the EOQ? 2. At what inventory level should an order be placed to prevent having to draw on the safety stock? 3. What are the total inventory costs, including the costs of carrying the safety stock? 4. The wheat processor agrees to pay the elevator removal charges if Strawberry Bread will purchase wheat in quantities of 650,000 bushels. Would it be to Strawberry Bread's advantage to order under this altemative?

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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