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PROBLEM 2 The Strawbery Bread Company buys and then sells (as bread) 2.6 million bushels of wheat annually. The wheat must be 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 P5 per bushel. The company maintains a safety stock of 200,000 bushels. The delivery time is 6 weeks. REQUIRED: 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?

PROBLEM 2 The Strawbery Bread Company buys and then sells (as bread) 2.6 million bushels of wheat annually. The wheat must be 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 P5 per bushel. The company maintains a safety stock of 200,000 bushels. The delivery time is 6 weeks. REQUIRED: 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?

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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REQUIRED:
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 alternative?

PROBLEM 2 The Strawberry Bread Company buys and then sells (as bread) 2.6 million bushels of wheat annually. The wheat must be 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 P5 per bushel. The company maintains a safety stock of 200,000 bushels. The delivery time is 6 weeks. REQUIRED: 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 3 (MULTIPLE CHOICE) 1. Inventory management is the formulation and administration of plans and policies to efficiently and satisfactorily meet production and merchandising requirements and minimize costs relative to inventories. One of its objectives is to a. maximize the units in inventory. b. maximize sales. c. minimize production costs. d. maintain inventory at a level that best balances the estimates of actual savings, the cost of carrying additional inventory, and the efficiency of inventory control.
Transcribed Image Text:PROBLEM 2 The Strawberry Bread Company buys and then sells (as bread) 2.6 million bushels of wheat annually. The wheat must be 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 P5 per bushel. The company maintains a safety stock of 200,000 bushels. The delivery time is 6 weeks. REQUIRED: 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 3 (MULTIPLE CHOICE) 1. Inventory management is the formulation and administration of plans and policies to efficiently and satisfactorily meet production and merchandising requirements and minimize costs relative to inventories. One of its objectives is to a. maximize the units in inventory. b. maximize sales. c. minimize production costs. d. maintain inventory at a level that best balances the estimates of actual savings, the cost of carrying additional inventory, and the efficiency of inventory control.
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