Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 20, Problem 11QP
Summary Introduction

To determine: The economic order quantity (EOQ).

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Economic order quantity refers to a model or tool designed for reducing the total costs (carrying costs and ordering costs) of the inventory.

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Q5./Suppose that the demand for a product is 10000 per year and the items are withdrawn uniformly. The order cost is 1000$ and the inventory holding cost 6$ per item per year. If shortages cost 5$ per item per year. Find: 1. The economic order quantity 2. Maximum inventory (I Max) 3. The number of ordering during the year (Order frequency) 4. The interval between two orders
QUESTION 5 A). What are inventories? Why are they important to manufacturing companies? B). What is the difference between FIFO and LIFO? C). Given the following data, calculate a level production plan, quarterly ending inventory, and average quarterly inventory. If inventory carrying costs are $6 per unit per quarter, what is the annual carrying cost? Opening and ending inventory are zero. Quarter 1 Quarter 2| Quarter 3 Quarter 4 Totals $ Forecast Demand 5000 7000 8500 9500 Production Ending Inventory Average Inventory Inventory Cost If the company always carries 100 units of safety stock, what is the annual cost of carrying it? D) Perform an ABC analysis on the following set of products. Annual Item Demand Unit Cost A211 800 $9 B390 100 $90 C003 450 $6 D100 400 $100 E707 85 $2,000 F660 250 $320 G473 500 $75 H921 100 $75
What is the economic order size? (EOQ)Additionally, find the Total cost, Average Inventory, and Order frequency

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Fundamentals of Corporate Finance

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