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 compute: The optimum order quantity using EOQ model.

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Answer 1

Question

Chapter 20, Problem 20.33P

1.

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 compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

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Students have asked these similar questions

Effect of management evaluation criteria on EOQ model. Rugged Outtters purchases one model of mountain bike at a wholesale cost of $520 per unit and resells it to end consumers. The annual demand for the company’s product is 49,000 units. Ordering costs are $500 per order and carrying costs are $100 per bike per year, including $40 in the opportunity cost of holding inventory.

A new purchasing agent has been hired by company XYZ who wants to start using EOQ method And its supporting decision elements. The following information has been gathered Annual demand in units 260,000 units Working days per year Lead time in days 260 12 Ordering cost per purchase order Annual unit carrying cost 160 30 Required: (5pts each) a) Find the EOQ b) Number of orders to be made per year c) Average daily demand d) Total ordering cost e) Total carrying cost What is the total relevant cost with the EOQ g) Select a ordering amount ABOVE the EOQ, what is the total relevant ordering and total relevant carrving cost and grand total of both h) IF the company has been ordering in quantity of 1000 units, what is the S savings by now using the EOQ

Question 5: IKIT company produces and sells recliner chairs. IKIT uses an absorption product costing system, which means that both variable and fixed overhead are included in the product cost. Cost estimates for a recliner chair and expected production volume for next year are as follows: Per Unit Total $40 $20 Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses Fixed manufacturing overhead Expected volume of production (units): $14 $15 $380,000 $460,000 42,000 The company's owners expect to earn a rate of return (ROI) of 30% on their invested assets of $2,500,000. Required: a. IKIT currently uses the cost-plus pricing method. Compute the mark-up percentage and target selling price that will allow IKIT to earn its desired ROI of 30% for next year.. Click or tap here to enter text.

Answer 2

Question

Chapter 20, Problem 20.33P

1.

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 compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

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Answer 3

Question

Chapter 20, Problem 20.33P

1.

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 compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

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Answer 4

Question

Chapter 20, Problem 20.33P

1.

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 compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

Expert Solution & Answer

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Answer 5

Chapter 20, Problem 20.33P

1.

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 compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

Answer 6

Chapter 20, Problem 20.33P

1.

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 compute: The optimum order quantity using EOQ model.

Answer 7

Chapter 20, Problem 20.33P

1.

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 compute: The optimum order quantity using EOQ model.

Answer 8

2. a.

To determine

To compute: The number of order per year.

Answer 9

2. a.

To determine

To compute: The number of order per year.

Answer 10

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

Answer 11

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

Answer 12

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

Answer 13

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

Answer 14

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

Answer 15

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

Answer 16

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Answer 17

Expert Solution & Answer

Answer 18

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Answer 19

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Solution Summary: The author explains that economic order quantity is the quantity of order that is purchased from supplier at a time to reduce the carrying and ordering cost of inventory.

To compute: The number of order per year.

To compute: The annual relevant total cost of ordering and carrying inventory.

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

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Chapter 20 Solutions