PROBLEM 6 The following information pertains to AAA Manufacturing Company’s Product X: Annual Demand 33,750 units Annual cost to hold one unit of inventory P15 Setup cost (or the cost to initiate a production run P500 Beginning inventory of Product X 0 At present, the company produces 2,250 units of Product X per production run, for a total of 15 production runs per year. The Company is considering to use the EOQ model to determine the economic lot size and the number of production runs that will minimize the total inventory carrying cost and setup cost for Product X. At present, the company’s total annual inventory costs is If the EOQ model is used, the economic lot size is If the EOQ model is used, the number of production runs should be If the EOQ model is used, the total annual inventory costs, compared with that under present system, will increase (decrease) by
PROBLEM 6 The following information pertains to AAA Manufacturing Company’s Product X: Annual Demand 33,750 units Annual cost to hold one unit of inventory P15 Setup cost (or the cost to initiate a production run P500 Beginning inventory of Product X 0 At present, the company produces 2,250 units of Product X per production run, for a total of 15 production runs per year. The Company is considering to use the EOQ model to determine the economic lot size and the number of production runs that will minimize the total inventory carrying cost and setup cost for Product X. At present, the company’s total annual inventory costs is If the EOQ model is used, the economic lot size is If the EOQ model is used, the number of production runs should be If the EOQ model is used, the total annual inventory costs, compared with that under present system, will increase (decrease) by
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PROBLEM 6
The following information pertains to AAA Manufacturing Company’s Product X:
Annual Demand 33,750 units
Annual cost to hold one unit of inventory P15
Setup cost (or the cost to initiate a production run P500
Beginning inventory of Product X 0
At present, the company produces 2,250 units of Product X per production run, for a total of 15 production runs per year. The Company is considering to use the EOQ model to determine the economic lot size and the number of production runs that will minimize the total inventory carrying cost and setup cost for Product X.
- At present, the company’s total annual inventory costs is
- If the EOQ model is used, the economic lot size is
- If the EOQ model is used, the number of production runs should be
- If the EOQ model is used, the total annual inventory costs, compared with that under present system, will increase (decrease) by
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