Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 20, Problem 20.17MCQ
To determine
Economic Order Quantity (EOQ):
Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.
To identify: The correct option
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Jack’s Tracks sells 24,000 custom-designed GoKarts per year. These GoKarts are sold evenly throughout the year. The manufacturer charges Jack a $50 processing cost per order, and Jack incurs a carrying cost of $240 per year including storing each GoKart at a local warehouse. What is the economic order quantity for ordering materials?a. 100b. 1,000c. 2,000d. 10,000
Q.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.
An automobile parts supplier sell Excel brand batteries to van dealers. The annual demand is approximately 1,000 batteries. The supplier pays RO 20 for each battery and estimates that the annual holding cost is 30 percent of the battery’s value. It costs approximately RO 10 to place an order. The supplier currently orders 20 batteries per month. Determine the economic order quantity.
a.
57.74 units
b.
28.28 units
c.
28.82 units
d.
82.82 units
Chapter 20 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 20 - Why do better decisions regarding the purchasing...Ch. 20 - Name six cost categories that are important in...Ch. 20 - What assumptions are made when using the simplest...Ch. 20 - Give examples of costs included in annual carrying...Ch. 20 - Give three examples of opportunity costs that...Ch. 20 - What are the steps in computing the cost of a...Ch. 20 - Why might goal-congruence issues arise when...Ch. 20 - JIT purchasing has many benefits but also some...Ch. 20 - What are three factors causing reductions in the...Ch. 20 - You should always choose the supplier who offers...
Ch. 20 - Prob. 20.11QCh. 20 - What are the main features of JIT production, and...Ch. 20 - Distinguish inventory-costing systems using...Ch. 20 - Describe three different versions of backflush...Ch. 20 - Discuss the differences between lean accounting...Ch. 20 - The order size associated with the...Ch. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Lyle Co. has only one product line. For that line,...Ch. 20 - Just-in-time inventory assumes all of the...Ch. 20 - Economic order quantity for retailer. Wonder Line...Ch. 20 - Economic order quantity, effect of parameter...Ch. 20 - EOQ for a retailer. The Fabric World sells fabrics...Ch. 20 - EOQ for manufacturer. Sk8 Company produces...Ch. 20 - Sensitivity of EOQ to changes in relevant ordering...Ch. 20 - JIT production, relevant benefits, relevant costs....Ch. 20 - Backflush costing and JIT production. Grand...Ch. 20 - Backflush costing, two trigger points, materials...Ch. 20 - Backflush costing, two trigger points, completion...Ch. 20 - Prob. 20.30PCh. 20 - Prob. 20.31PCh. 20 - Prob. 20.32PCh. 20 - Prob. 20.33PCh. 20 - JIT purchasing, relevant benefits, relevant costs....Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Backflush costing and JIT production. The Acton...Ch. 20 - Backflush, two trigger points, materials purchase...Ch. 20 - Backflush, two trigger points, completion of...Ch. 20 - Lean accounting. Reliable Security Devices (RSD)...Ch. 20 - JIT production, relevant benefits, relevant costs,...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The Best Furniture company produces a specialty wood furniture product, and has the following information available concerning its inventory items: Ordering costs per purchase order Carrying costs per year P15,000 P300 per unit Annual demand is 20,000 packages per year. The purchase price per package is P1,600. What is the economic order quantity? 2,000,000 units 3,464 units 150,000 units 1,414 unitsarrow_forwardWhat is the economic order quantity?arrow_forwardThe Best Furniture company produces a specialty wood furniture product, and has the following information available concerning its inventory items: Ordering costs per purchase order Carrying costs per year P15,000 P300 per unit Annual demand is 20,000 packages per year. The quantity per order equals 1,000 units. What is the total annual ordering and holding costs? P450,000 P25,000 P300,000 P150,000arrow_forward
- Figure 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_forwardWesley Utility Company uses 2,500 units per year which it stores at $0.50 per unit per annum. The cost to place an order is $100. a) Calculate: i. The economic order quantity (EOQ) b) If the company decides to make the items on its own machine with a potential capacity of 5,000 units per year, calculate: i. The economic order quantity (EOQ) ii. The annual ordering cost iii. The annual carrying costarrow_forwardNeed helparrow_forward
- A merchandising company sells a particular product that is estimated to have approximately 1,500 sales this year. The purchasing department estimates that it will cost approximately $200 to place an order for this product: $180 fixed and $20 variable. The total annual carrying cost for this product is $1,500. What is the product’s EOQ? A. 775 B. 19 C. 735 D. 20arrow_forward8.. If the cost to place one order increased by P 10 and the cost to carry one Material A in stock remains the same, the economic order quantity will be 600 units а. b. 447 units с. 425 units d. 500 unitsarrow_forwardQuestion 1: The Jansen Company manufactures and sells two products: plastic boxes and plastic trays. Estimated needs for a unit of each are- Boxes Trays Cost per unit Material A 2 pounds 1 pound $2.5 per pound Material B 4 pounds 3 pounds $1.5 per pound Direct labor 2 hours 2.5 hours $2 per hour The estimated sales by product for the year 2021 are, 42,000 Boxes and 24,000 Trays. Price per Box is $20 and per Tray is $18. The beginning inventories are expected to be as follows: 4,000 pounds 6,000 pounds 1,000 units 500 units Material A Material B Воxes Trays The desired inventories 5,000 pounds 10,000 pounds 4,000 units 2000 units Material A Material B Boxes Trays Requirements 1. Prepare a revenue budget 2. Production schedule (in units) 3. Purchases of raw materials budget (in units) 4. Purchases of raw materials budget (in $) 5. Direct labor budget in hours 6. Direct labor budget in amount ($) 7. Overhead to be charged to productionarrow_forward
- Dogarrow_forwardFind EOQ and total cost per year to order and carry Adam jigs and tools uses 3,200 units of a product per year on a continuous basis. Carrying costs= P70 per year, ordering costs = P262.05 per order. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in inventory.arrow_forwardFirm Tezla produces the product QuickCar. Annual demand for QuickCar is 600600 units per year on a continuous basis. The product has inventory holding costs of $30$30 per unit per year and order costs of $300$300 per order. It takes 3030 days to receive a shipment after an order is placed. Calculate the economic order quantity (EOQ). a. 7777 units b. 110110 units c. 6060 units d. 4444 unitsarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Inventory management; Author: The Finance Storyteller;https://www.youtube.com/watch?v=DZhHSR4_9B4;License: Standard Youtube License