Answered: Requirement: 1. Compute the Economic…

Requirement: 1. Compute the Economic Order Quantity. 2. Prepare the table which the entity can procure inventories in several lots as follows : 3,600 units; 1,800 units, 600 units and 360 units.

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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Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

Entity A's monthly inventory requirement is 300 units. The ordering cost are P50 per order while the annual cost
are expected to be P1.00 per unit.
Requirement:
1. Compute the Economic Order Quantity.
2. Prepare the table which the entity can procure inventories in several lots as follows : 3,600 units; 1,800 units, 600
units and 360 units.
Use this table
Order Size
Number of
Total
Cost
to
Average
Total Cost to
Total Cost to
Orders
Order
Inventory
Carry
Order and Total
Cost to Carry

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