The company uses 1,100 units of an item per year. The cost of carrying the item in inventory is $200 per unit per year, and the cost of ordering the chemical is $150 per order. The firm uses the chemical at a constant rate. a. What is the Economic Order Quantity? b. Using the data from above, assume that Company Products operates 250 days per year and its total usage is 1,100 units per year. The lead time is 2 days and Company wants to maintain a safety stock of 4 units. What is the reorder point?

The company uses 1,100 units of an item per year. The cost of carrying the item in inventory is $200 per unit per year, and the cost of ordering the chemical is $150 per order. The firm uses the chemical at a constant rate. a. What is the Economic Order Quantity? b. Using the data from above, assume that Company Products operates 250 days per year and its total usage is 1,100 units per year. The lead time is 2 days and Company wants to maintain a safety stock of 4 units. What is the reorder point?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 47E: Klamath Company produces a single product. The projected income statement for the coming year is as...

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How many should the company order per batch so that it can minimize its costs of carrying and ordering costs?