Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.3WUE
Summary Introduction
To determine: The economic order quantity (EOQ).
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Question 1
LUMU has demand for 1400 water pumps each year. The cost of a water pump to LUMU is $400.
Inventory carrying cost is estimated to be 20% of the unit cost and the ordering cost is $25 per order. If
the owner orders in quantities of 300 or more, he can get a 5% discount on the pumps, Should LUMU
accepts the quantity discount?
4. Genesis Company is a wholesaler. It purchases 60,000 units of Product X per month for sale to
retailers. The cost of placing an order is P100. The cost of holding one unit of inventory for one year is
P4.
Note: Kindly input your answer with comma.
Example: 10,000
Required:
a. Compute the economic order quantity.
b. How many orders would be placed under the EOQ policy?
c. Compute the annual ordering cost for the EOQ.
d. Compute the annual carrying cost for the EOQ.
e. Compute the total inventory-related cost at the EOQ.
3. Aapki Humaari Beauty LLP requires 12000 units of Bear Shampoo annually as a part of its sales requirement, ordering one month usage at a time.
Each shampoo bottle costs Rs 100.The ordering cost per order is Rs 50 and the carrying cost of the average inventory on a yearly basis is 10%
You as an adviser to the company advise to buy the most economical order size.
a. The company looks forward for your advice on understanding the concept of economic order size.
b. Advise what should be desired quantity as per the economic purchase policy of the company and how much the company may save on account of ordering cost.
Note : You can round off any number to lower side for the calculation purpose
Chapter 15 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 15.1 - Why is working capital management one of the most...Ch. 15.1 - Prob. 15.2RQCh. 15.1 - Prob. 15.3RQCh. 15.2 - Prob. 15.4RQCh. 15.2 - Prob. 15.5RQCh. 15.2 - What are the benefits, costs, and risks of an...Ch. 15.2 - Prob. 15.7RQCh. 15.3 - Prob. 15.8RQCh. 15.3 - Briefly describe the following techniques for...Ch. 15.3 - Prob. 15.10RQ
Ch. 15.4 - Prob. 15.11RQCh. 15.4 - Prob. 15.12RQCh. 15.4 - What are the basic tradeoffs in a tightening of...Ch. 15.4 - Prob. 15.14RQCh. 15.4 - Prob. 15.15RQCh. 15.4 - Prob. 15.16RQCh. 15.5 - Prob. 15.17RQCh. 15.5 - What are the firms objectives with regard to...Ch. 15.5 - Prob. 15.19RQCh. 15.5 - Prob. 15.20RQCh. 15.5 - Prob. 15.21RQCh. 15 - EOQ analysis Thompson Paint Company uses 60,000...Ch. 15 - Learning Goal 4 ST15- 3 Relaxing credit standards...Ch. 15 - Learning Goal 2 E15-1 Everdeen Inc. has a 90-day...Ch. 15 - Learning Goal 2 E15-2 Icy Treats Inc. is a...Ch. 15 - Prob. 15.3WUECh. 15 - Forrester Fashions has annual credit sales of...Ch. 15 - Prob. 15.1PCh. 15 - Learning Goal 2 P15-2 Changing cash conversion...Ch. 15 - Learning Goal 3 P15-5 EOQ analysis Tiger...Ch. 15 - EOQ, reorder point, and safety stock Alexis...Ch. 15 - Prob. 15.7PCh. 15 - Prob. 15.8PCh. 15 - Prob. 15.9PCh. 15 - Relaxation of credit standards Lewis Enterprises...Ch. 15 - Initiating an early payment discount Gardner...Ch. 15 - Shortening the credit period A firm is...Ch. 15 - Lengthening the credit period Parker Tool is...Ch. 15 - Prob. 15.14PCh. 15 - Prob. 15.15PCh. 15 - Prob. 15.16PCh. 15 - Prob. 15.18P
Knowledge Booster
Similar questions
- Please help me with show all calculation thankuarrow_forwardSmart Strike Company manufactures and sells soccer balls for teams of children in elementary and high school. Smart Strike's best-selling lines are the practice ball line (durable soccer balls for training and practice) and the match ball line (high-performance soccer balls used in games). In the first four months of next year, Smart Strike expects to sell the following: Practice Balls Match Balls Units Selling Price Units Selling Price January 50,000 $8.25 7,000 $16.00 February 58,000 $8.25 7,500 $16.00 March 80,000 $8.25 14,000 $16.00 April 100,000 $8.25 18,000 $16.00 Required: 1. Construct a sales budget for Smart Strike for the first three months of the coming year. Show total sales for each product line by month and in total for the first quarter. If required, round your answers to the nearest cent. Smart Strike CompanySales BudgetFor the First Quarter of Next Year January February March Quarter Practice ball: Units ____ ____ _____…arrow_forwardQ.3.1 Gill Enterprises produces a number of consumer items, including a stove. A key component of the stove is purchased from an outside supplier. In total, the company purchases 2 500 components each year. It costs approximately R12 to place an order and it costs R0.25 to carry one part in inventory for a year. The company is operational for 50 weeks in a year. Required: Q.3.1.2 It takes about four weeks to receive an order of parts from the supplier. The company normally uses 52 parts each week in production. However, usage can be as high as 70 parts per week. Calculate the safety stock. Calculate the reorder point with safety stock included.arrow_forward
- of 10 O Macmillan Learning A company produces products at a cost of $35 each. Defective products cost an additional $15 each to repair. The probability of no defective products is 80%. The probability of 5% defective products is 20%. What is the expected cost of producing 700 products? (Use decimal notation. Give your answer to two decimal places.) expected cost: $arrow_forwardCopy of Assume that there are 100 students in the world (I know it is a little low, but for ease...) and 30 of them are pizza eaters. These 30 students purchase 5,000 pizzas in a given time period and 200 of these 5,000 pizzas are pepperoni. What is the CDI for pepperoni pizzas purchased? 13.3 133.3 100.3 200.3arrow_forwardThe Reward One Company manufactures windows. Its manufacturing plant has the capacity to produce 12,000 windows each month. Current production and sales are 10,000 windows per month. The company normally charges $250 per window. Requirement 1. Should Reward One accept this special order? Show your calculations. Begin by completing an analysis, and start by showing the computation of the company's operating income without the special order. Next, calculate operating income with the special order, and then calculate the differences between the two columns. (Complete all input fields. For amounts with no change, make sure to enter "0" in the appropriate cells of the Difference column.) Variable costs that vary with number of units produced Direct materials $600,000 Direct manufacturing labor 700,000 Variable costs (for setups, materials handling, quality control, and so on) that vary with number of batches, 100 batches × $1,500 per batch…arrow_forward
- Smart Strike Company manufactures and sells soccer balls for teams of children in elementary and high school. Smart Strike's best-selling lines are the practice ball line (durable soccer balls for training and practice) and the match ball line (high-performance soccer balls used in games). In the first four months of next year, Smart Strike expects to sell the following: Practice Balls Match Balls Units Selling Price Units Selling Price January 47,000 $8.55 6,700 $16.80 February 61,000 $8.55 7,600 $16.80 March 81,000 $8.55 13,500 $16.80 April 100,000 $8.55 16,000 $16.80 Smart Strike requires ending inventory of product to equal 20 percent of the next month's unit sales. Beginning inventory in January was 9,400 practice soccer balls and 1,340 match soccer balls. Every practice ball requires 0.7 square yard of polyvinyl chloride panels, one bladder with valve (to fill with air), and 3 ounces of glue. Smart Strike's policy is that 20…arrow_forwardFigure 1 Mrs. Brown's Bagel Company manufactures specialty bagels. The company buys flour in 50-pound bags that cost GHS25 each. The company uses 10,000 bags per year, and usage occurs evenly throughout the year. The average cost to carry a 50-pound bag in inventory per year is GHS4, and the cost to place an order is GHS10. The company works 250 days per year. 20. Refer to Figure 1. If Brown's lead time is four working days, the average rate of usage is 40 bags per day, and the company carries a safety stock of 20 bags, the reorder point would be a. 180 bags. b. 140 bags. c. 160 bags. d. 100 bags.arrow_forwardmart Strike Company manufactures and sells soccer balls for teams of children in elementary and high school. Smart Strike's best-selling lines are the practice ball line (durable soccer balls for training and practice) and the match ball line (high-performance soccer balls used in games). In the first four months of next year, Smart Strike expects to sell the following: Practice Balls Match Balls Units Selling Price Units Selling Price January 47,000 $8.60 6,600 $17.10 February 61,000 $8.60 7,700 $17.10 March 86,000 $8.60 13,500 $17.10 April 105,000 $8.60 17,000 $17.10 Smart Strike requires ending inventory of product to equal 20 percent of the next month's unit sales. Beginning inventory in January was 9,400 practice soccer balls and 1,320 match soccer balls. Every practice ball requires 0.7 square yard of polyvinyl chloride panels, one bladder with valve (to fill with air), and 3 ounces of glue. Smart Strike's policy is that 20…arrow_forward
- 5. Genesis Company is a wholesaler. It purchases 60.000 units of Product X per month for sale to retailers. The cost of placing an order is P100. The cost of holding one unit of inventory for one year is P4. Note: Kindly input your answer with comma. Example: 10,000 Required: Previously, the company had been purchasing 5,000 units of product X per order: a. What is the ordering cost per year under the previous policy? b. The annual carrying cost? c. How much money does the company save over the policy of purchasing 5,000 units per order using the EOQ policy?arrow_forwardSmart Strike Company manufactures and sells soccer balls for teams of children in elementary and high school. Smart Strike's best-selling lines are the practice ball line (durable soccer balls for training and practice) and the match ball line (high-performance soccer balls used in games). In the first four months of next year, Smart Strike expects to sell the following: Practice Balls Match Balls Units Selling Price Units Selling Price January 48,000 $8.85 6,400 $17.20 February 58,000 $8.85 7,500 $17.20 March 86,000 $8.85 13,000 $17.20 April 105,000 $8.85 17,000 $17.20 Smart Strike requires ending inventory of product to equal 20 percent of the next month's unit sales. Beginning inventory in January was 9,600 practice soccer balls and 1,280 match soccer balls. Every practice ball requires 0.7 square yard of polyvinyl chloride panels, one bladder with valve (to fill with air), and 2 ounces of glue. Smart Strike's policy is that 20…arrow_forwardFirm B's demand for a product is 10 units per month. Its supplier charges an ordering cost of $5 per order and $10 per unit with a 10% discount for orders of 25 units or higher. Firm B incurs a 30% annual holding cost. How much does Firm B save each year (including purchasing, ordering, and holding costs) if it purchases enough units to get the discount? $122.25 $6.00 $2.25 $120.00arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning