Stocks of cement on a construction site are allowed to run down to a level of 3 tonnesbefore being replenished. Cement is used steadily at 50 tonnes per week. Cementcosts 15 Euro per tonne and the cost of storage and deterioration per week is 10% ofthe cement price. Each time cement is ordered, there is a cost of processing this orderof 1 Euro.How much cement should be ordered each time?What is the cost of ordering and storing the cement?

The best order amount for a firm to acquire in order to reduce inventory expenses such as holding…

Answered: Stocks of cement on a construction site…

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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Stocks of cement on a construction site are allowed to run down to a level of 3 tonnesbefore being replenished. Cement is used steadily at 50 tonnes per week. Cementcosts 15 Euro per tonne and the cost of storage and deterioration per week is 10% ofthe cement price. Each time cement is ordered, there is a cost of processing this orderof 1 Euro.
How much cement should be ordered each time?
What is the cost of ordering and storing the cement?

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