CHOCODOKIA is a famous chocolate factory in Switzerland. Every year, the company must produce 2200 units (with the same amount of production). Sales are evenly distributed throughout the year. The company wants to determine the lot size which can minimize the cost of ordering (setup costs) and costs of storage (carrying costs). Given that the cost of producing each unit is $50, carrying costs are 10% of the average inventory and setup costs are $20 (per production run). Using the Differentiation Method (1st and 2nd Derivative Test), Determine economic lot size for the company and provide an explanation of the results of these calculations.

CHOCODOKIA is a famous chocolate factory in Switzerland. Every year, the company must produce 2200 units (with the same amount of production). Sales are evenly distributed throughout the year. The company wants to determine the lot size which can minimize the cost of ordering (setup costs) and costs of storage (carrying costs). Given that the cost of producing each unit is $50, carrying costs are 10% of the average inventory and setup costs are $20 (per production run). Using the Differentiation Method (1st and 2nd Derivative Test), Determine economic lot size for the company and provide an explanation of the results of these calculations.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The Products 4U Inc. manufactures and sells one product which has the following available information: Description Cost Selling price per unit $27.00 Variable costs per unit: Direct material $9.00 Direct labour $2.30 Manufacturing overhead $1.40 Sales commission $3.80 Total annual fixed costs $100,000 How many units does the company have to sell every year to break even? Rounding Rules: For units, round up to the next whole unit. Examples: If your answer is 11,248.4689 units, enter 11249 If your answer is 11,248.5175 units, enter 11249 If your answer is 11,248.0010 units, enter 11249
B. Smash Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of P7.00.The new customer is geographically separated from Smash’s other customers, and existing sales will not be affected. Smash normally produces 82,000 units but plans to produce and sell only 65,000 units in the coming year. The normal sales price is P12.00 per unit. Unit cost information is as follows: Direct materials P 3.10 Direct labor 2.25 Variable overhead 1.15 Fixed overhead 1.80 Total P` 8.30 If Smash accepts the order, no fixed manufacturing activities will be affected because there…
Question 2 Ronamart needs 1000 coffee makers per year. The cost of each coffee maker is $78. Ordering cost is $100 per order. Carrying cost is $20 of unit cost. Lead time is 5 days. RonaMart is open 360 days/yr. Required: 2. how many times per year does the store reorder? 3. What is the length of order cycle? 4. What is the total annual cost if EOQ Quantity is ordered?
ames Jim Inc. produces the following three products: T-Shirts Hats Sweatshirts Selling price per unit $40 $16 $50 Less: Variable costs per unit - 28 - 12 - 30 Contribution per unit $12 $ 4 $20 Fixed costs are $77,000 per year. All sales: 50% of all sales in units are T-Shirts, 30% are Hats, and 20% are Sweatshirts. Required: Calculate the following values: SHOW ALL CALCULATIONS. ROUND EACH NUMBER TO TWO (2) DECIMAL PLACES. A. Break-even point in total units B. Number of T-shirts that will be sold at break-even C. Total sales in units to obtain a before-tax profit of $22,400
In problem 13.4, if the company can ship the units unassembled, it can ship 750 units in a truck. What is the line haul cost per unit now?(13.4) A company ships a particular product to a market located 1500 miles from the plant at a cost of $4.50 per mile. Normally it ships 500 units at a time. What is the line haul cost per unit?
18.This is Cost Accounting. Explain briefly and answer. The following information applies to PANCIT CANTON CO., which supplies microscopes to laboratories throughout the country. PCC purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. Annual demand (weekly demand=1/52 of annual demand) 20,800 units Orders per year 20 Lead time in days 15 days Cost of placing an order P100 What is the reorder point? Group of answer choices 875 units 857 units 1560 units 2080 units 940 units
4.Sunrise Poles manufactures hiking poles and is planning on producing 4,000 units in March and 3,700 in April. Each pole requires a half pound of material, which costs $1.20 per pound. The company’s policy is to have enough material on hand to equal 10% of the next month’s production needs and to maintain a finished goods inventory equal to 25% of the next month’s production needs. PLEASE NOTE: Units are rounded to whole numbers with commas as needed (i.e. 1,234). All dollar amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345), except for any "per" amounts (units or dollars), which are rounded to two decimal places and shown with "$" and commas as needed (i.e. $1,234.56) Cost per Pound Desired Ending Inventory DM per Unit Units to be Produced Pounds Needed for Production Required DM Pounds Beginning Inventory Total Cost of DM Purchase Total DM Required Using the information above, along with the terms above, prepare a direct materials…
3. The company Latinoamericana S.A., manufactures marbles for children. It handles several lines of marbles: big, medium and small. Variable cost per unit BIG: $ 0.45 MEDIUM: $ 0.60 SMALL: $ 0.25 Percentage of market share (participation) BIG: 40% MEDIUM: 20% SMALL: 40% Sale price: BIG: $ 1.50 MEDIUM: $ 0.90 SMALL: $ 0.50 Fixed costs of the company $30,000Calculate the breakeven point in units of the company if you want an operating profit of $10,000. __________________ procedure please
2. MGS a manufacturing company placed an order of 24,000 units semiannually at a price of 20 per unit. Its carrying cost is 15% and the order cost is 12 per order. Compute the following:a) What is the most economical order quantity?b) How many orders need to be placed?
Cats Products Inc. has a division that makes cat treats. The division has fixed costs of P10,000 per year, and it expects to sell 40,000 bags annually. Determine the price must the division charge in order to break even given the variable cost per bag is P2.00, P2.25 P2.48 P2.83 P3.16
1.How many units of scooters, best calls, and rollerblades should summertime Inc. produce? 2.What is the maximum amount summertime and corporate would be willing to pay for another 1200 additional units of fun? info: The demand for the products far exceeds the direct materials available to produce the products. Fun cost $2 per pound and a maximum of 7975 pounds is available each month. Summertime Inc. must produce a minimum of 175 units of each product
Question 1: Pretexpo is a Turkish manufacturing company and produces fabrics for the 2021 Textiles Trade show which will be held in Belgium. Fabrics are demanded for the show as 100 units per day. Fixed cost for production of fabric is $60 and total material and labor cost per unit fabric is $20, storage and handling costs are $15 per unit per year. Suppose there are 300 working days one year. a) Determine the optimal order quantity. b) What is the time between placement of orders? c) What is the average annual cost of holding and setup due to this product? d) If replenishment lead time is three months, determine the reorder level based on the on-hand inventory. e) If replenishment lead time is four days, determine the reorder level based on the on-hand inventory. f) Draw a graph of the amount of inventory over time. Indicate R value and show order placement and order arrival times. Using your graph determine the average amount of inventory. Determine the optimal order quantity.