Cheeseburger and Taco Company purchases 19,634 boxes of cheese each year. It costs $21 to place and ship each order and $3.74 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is the annual ordering cost of cheese inventory.

Cheeseburger and Taco Company purchases 19,634 boxes of cheese each year. It costs $21 to place and ship each order and $3.74 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is the annual ordering cost of cheese inventory.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 8E: Melchar Company uses 78,125 pounds of oats each year. The cost of placing an order is 18, and the...

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Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
Melchar Company uses 78,125 pounds of oats each year. The cost of placing an order is 18, and the carrying cost for one pound of oats is 0.45. Required: 1. Compute the economic order quantity for oats. 2. Compute the carrying and ordering costs for the EOQ.
This year, Hassell Company will ship 4,000,000 pounds of chocolates to customers with total order-filling costs of 900,000. There are two types of customers: those who order 50,000 pound lots (small customers) and those who order 250,000 pound lots (large customers). Each customer category is responsible for buying 1,500,000 pounds. The selling price per pound is 2 per lb for the 50,000 pound lot and 3 per lb for the larger lots, due to differences in the type of chocolate. ABC would likely assign order-filling costs to the customer type as follows: a. 450,000, small; 450,000, large (using pounds as the driver) b. 360,000, small; 540,000, large (using revenue as the driver) c. 750,000, small; 150,000, large (using number of orders as the driver) d. 450,000, small; 450,000, large (using customer type as the driver)
Sterling Corporation has an EOQ of 5,000 units. The company uses an average of 500 units per day. An order to replenish the part requires a lead time of five days. Required: 1. Calculate the reorder point, using Equation 20.3. 2. Graphically display the reorder point, where the vertical axis is inventory (units) and the horizontal axis is time (days). Show two replenishments, beginning at time zero with the economic order quantity in inventory. 3. What if the average usage per day of the part is 500 units but a daily maximum usage of 575 units is possible? What is the reorder point when this demand uncertainty exists?
Kaune Food Products Company manufactures canned mixed nuts with an average manufacturing cost of 52 per case (a case contains 24 cans of nuts). Kaune sold 150,000 cases last year to the following three classes of customer: The supermarkets require special labeling on each can costing 0.04 per can. They order through electronic data interchange (EDI), which costs Kaune about 61,000 annually in operating expenses and depreciation. Kaune delivers the nuts to the stores and stocks them on the shelves. This distribution costs 45,000 per year. The small grocers order in smaller lots that require special picking and packing in the factory; the special handling adds 25 to the cost of each case sold. Sales commissions to the independent jobbers who sell Kaune products to the grocers average 8 percent of sales. Bad debts expense amounts to 9 percent of sales. Convenience stores also require special handling that costs 30 per case. In addition, Kaune is required to co-pay advertising costs with the convenience stores at a cost of 15,000 per year. Frequent stops are made to each convenience store by Kaune delivery trucks at a cost of 30,000 per year. Required: 1. Calculate the total cost per case for each of the three customer classes. (Round unit costs to four significant digits.) 2. Using the costs from Requirement 1, calculate the profit per case per customer class. Does the cost analysis support the charging of different prices? Why or why not? 3. What if Kaune charged the average price per case to all customer classes? How would that affect the profit percentages?
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Crescent Company produces stuffed toy animals; one of these is Arabeau the Cow. Each Arabeau takes 0.20 yard of fabric (white with irregular black splotches) and eight ounces of polyfiberfill. Fabric costs 3.50 per yard and polyfiberfill is 0.05 per ounce. Crescent has budgeted production of Arabeaus for the next four months as follows: Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following months production needs and sufficient polyfiberfill be in inventory to satisfy 40 percent of the following months production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy. Each Arabeau produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is 15 per hour. Required: 1. Prepare a direct materials purchases budget of fabric for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. 2. Prepare a direct materials purchases budget of polyfiberfill for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. 3. Prepare a direct labor budget for the last quarter of the year showing the hours needed and the direct labor cost for each month and for the quarter in total.
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Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?