Question 6An Accountant must design inventory ordering systems for two new raw material items - A31 and B31. Thecompany operates 50 weeks a year. The accountant has gathered the following information about the twoitems:A31B3580 units60 unitsAverage weekly demandUnit purchase price$20$30Annual holding cost20% on purchase30% on purchasepricepriceOrdering cost$80 per order$30 per orderLead time2 weeks2 weeksCurrent order size300 units80 units250 units90 unitsMaximum weekly demandRequired:(i)Determine the optimal order quantity for material items - A31 and B35 using the economicorder quantity (EOQ) model. Show your calculations.

Optimum order quantity for Material A31: EOQ = 2DS/H D= Annual Demand = Average weekly…

An Accountant must design inventory ordering systems for two new raw material items - A31 and B31. The company operates 50 weeks a year. The accountant has gathered the following information about the two items: A31 60 units Average weekly demand Unit purchase price Annual holding cost B35 80 units $30 $20 20% on purchase 30% on purchase price price Ordering cost $80 per order $30 per order 2 weeks Lead time 2 weeks Current order size 300 units 250 units Maximum weekly demand 80 units 90 units Required: (i) Determine the optimal order quantity for material items - A31 and B35 using the economic order quantity (EOQ) model. Show your calculations.

An Accountant must design inventory ordering systems for two new raw material items - A31 and B31. The company operates 50 weeks a year. The accountant has gathered the following information about the two items: A31 60 units Average weekly demand Unit purchase price Annual holding cost B35 80 units $30 $20 20% on purchase 30% on purchase price price Ordering cost $80 per order $30 per order 2 weeks Lead time 2 weeks Current order size 300 units 250 units Maximum weekly demand 80 units 90 units Required: (i) Determine the optimal order quantity for material items - A31 and B35 using the economic order quantity (EOQ) model. Show your calculations.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter7: Inventories: Cost Measurement And Flow Assumptions

Section: Chapter Questions

Problem 4C

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