Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: McGraw-Hill Education. 16th edition.Chapter 7 - Problem #14Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering costs of $8 per order, and carrying costs of $1.60 per unit.  In the second year, Fisk Corporation finds that it can reduce ordering costs to $2 per order but that carrying costs stay the same at $1.60 per unit.  Also, volume remains at 49,000 units per year.A. What is the economica ordering quantity?B. How many orders will be placed during the year?C. What will the average inventory be?D. What is the total costs of ordering and carrying inventory?Thank you in advance!

Question
Asked Apr 8, 2019
74 views

Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: McGraw-Hill Education. 16th edition.

Chapter 7 - Problem #14

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering costs of $8 per order, and carrying costs of $1.60 per unit.  In the second year, Fisk Corporation finds that it can reduce ordering costs to $2 per order but that carrying costs stay the same at $1.60 per unit.  Also, volume remains at 49,000 units per year.

A. What is the economica ordering quantity?

B. How many orders will be placed during the year?

C. What will the average inventory be?

D. What is the total costs of ordering and carrying inventory?


Thank you in advance!

 

check_circle

Expert Answer

star
star
star
star
star
2 Ratings
Step 1

a)

Formula for calculation of EOQ:

fullscreen
Step 2

Calculation of economic order quantity (EOQ):

fullscreen
Step 3

b)

Calculation of number of orders to be plac...

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Finance

Related Finance Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: a corportation that wants to pay off its bond early typically has to pay one or more extra coupons a...

A: a corportation that wants to pay off its bond early typically has to pay one or more extra coupons a...

question_answer

Q: Suppose a security follows a geometric Brownian motion with interest rate r=0.01, volatility paramet...

A: The formula I have for simlating the prices have mu and sigma, but no r (Interest rate). Please repo...

question_answer

Q: A firm has a market value equal to its book value. Currently, the firm has excess cash of $1,800 and...

A: Market value of Equity = MVE = Book Value of Equity = BE = $ 7,500Number of shares outstanding, N = ...

question_answer

Q: A bond with annual coupon rate of 5.10% and price of $1,090 just yesterday paid a coupon. A total of...

A: Calculation of Yield to Maturity of the Bond:

question_answer

Q: Could you please give me a brief overview of what "cash flow for ROR analysis" is? Thanks.

A: ROR analysis is a short form for Rate of Return Analysis.Under ROR analysis, we need to find that Ra...

question_answer

Q: Mexican Motor's market cap is 200 billion pesos. Next year's cash flow is 8.6 billion pesos. Securit...

A: Mexican Motor's market cap, E = 200 billion pesos.Next year's cash flow, C =  8.6 billion pesos.Secu...

question_answer

Q: 4. Future value of annuities There are two categories of cash flows: single cash flows, referred to ...

A: Annuity means the a regular amount of fixed amount at an regular periodic intervals of time. Oridnar...

question_answer

Q: XXX, Inc. finances tis seasonal working capital need with short-term bank loans. Management plans to...

A: Calculating the interest payment on the working capital loan. We have,Loan Amount = $ 65,000Interest...

question_answer

Q: Money is deposited at the end of each week into an investment paying 2.6% interest compounded weekly...

A: Let the Money that is deposited at the end of each week = A.Periodicity here is weekly. Hence, perio...