The Metropolitan Book Company purchases paper from the Atlantic Paper Company. Metropolitan produces magazines and paperbacks that require 1,215,000 pounds of paper per year. The cost per order for the company is $1,200; the cost of holding 1 pound of paper in inventory is $0.08 per year. Determine the following. The economic order quantity The minimum total annual cost The optimal number of orders per year
Q: Martin company uses 625 units of a part each year. The cost of placing one order is $8; the cost of…
A: Economic order Quantity (EOQ) = [(2*Annual Demand * Set up cost)/Carrying cost]
Q: Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses…
A: Economic order quantity determines the optimum number of units that reduce cost per unit and…
Q: The ABC Semi Conductor Company purchase 40,000 units of mother board each year at a cost of $30.00…
A: EOQ = √ 2 X Annual Demand X Odering cost / Holding cost EOQ = √ 2 X 40,000 X 10 / 30 X 15% EOQ = √…
Q: A moped manufacturing company needs 100,000 units of moped tires for its production per year.The…
A: Economic order quantity was an inventory management costing principle used to find out required…
Q: Candy Delight Company manufactures candy. The company buys the sugar used in 15-pound boxes that…
A: Reorder Point is that level of minimum inventory which a manufacturing entity shall retain before it…
Q: Vale Corporation sells Product 'MAGNETITE' and Product 'HEMATITE', the sales of both products are…
A:
Q: An auto parts supplier sells Hardy-brand batteries to car dealers and auto mechanics. The annual…
A: The total cost of inventory is affected by the cost of the items purchased, ordering cost, and…
Q: Wesley Utility Company uses 2,500 units per year which it stores at $0.50 per unit per annum. The…
A: EOQ = Economic order quantity (EOQ) is a calculation on which companies perform that represents…
Q: A microbrewery purchases malt for production. The supplier charges $35 for delivery (no matter how…
A: Hi student Since there are multiple subparts, we will answer only first three subparts. If you want…
Q: [The following information applies to the questions displayed below.] Iguana, Inc., manufactures…
A: The question is based on the concept of Cost Accounting.
Q: Electronics Ltd manufactures air conditioners. It purchases 200,000 units of a particular type of…
A: I am answering the first three sub-parts of the question as per bartleby policies. Please submit the…
Q: The Xenopeltis Company estimates its requirement, which is 39,000 units semiannually at a price of…
A: EOQ = Square root of [(2*Annual demand*Ordering cost)/(Price per unit * Carrying cost%)] EOQ =…
Q: Homestead Jeans Co. has an annual plant capacity of 60,300 units, and current production is 47,100…
A: The differential analysis is made by the company to measure the difference in the cost and revenue…
Q: ACE processing company uses 2,400 units of a product per year on a continuous basis. The product…
A: Economic Order Quantity is an inventory management technique where it helps to order the required…
Q: A company requires 8,000 units of material A per month. The cost per order is $950 and the holding…
A: Total cost of buying the material includes holding cost + ordering cost
Q: Morning Glory buys cereal directly from the manufacturer for $20 per case. The company’s annual…
A: Economic order quantity: It can be defined as an optimal quantity that is purchased by the company…
Q: Healthy Plants Ltd. (HP) produces its premium plantfood in 50-pound bags. Demand for the product is…
A: A maximum stock level seems to be the highest amount of inventory that must not be surpassed within…
Q: A firm uses 2,400 units of a product per year on a continuous basis. The product carrying costs are…
A: Economic Order Quantity (EOQ) was related with inventory management and it helps to order the…
Q: The ABC Semi Conductor Company purchase 40,000 units of mother board each year at a cost of $30.00…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: The Casings Plant of Wyoming Machines makes plastics shells for the company's calculators. (Each…
A: Lets start with the basics. For calculating production required, we need to use below formula.…
Q: Malburn Construction Ltd. Manufactures and distributes window frames. The company uses 600,000 metal…
A: We need to use economic order quantity(EOQ) formula to calculate order size to minimize inventory…
Q: A store sells a product that has the annual demand of 16,156 units. It purchases the product from…
A: At EOQ, total ordering cost and carrying cost is minimum. Total ordering and carrying cost can be…
Q: Item X is a standard item stocked in a company's inventory of component parts. Each year the firm,…
A: EOQ = 2SDH
Q: A supermarket uses a supplier for its bottled water. The annual demand for this product is 24000…
A: Inventory cycle time is determined by dividing the number of working days by the number of orders.…
Q: mith Inc. expects to use 96,000 litters of paint annually costing P12 per litter. Inventory carrying…
A: Inventory carrying cost is the cost of keeping items in stock. The larger the volume of inventory,…
Q: Carrefour estimates an annual demand of a grocery product at 4800 kgs. It costs RO 100 to make and…
A: Inventory level at which business should place order is known as reorder point in business.
Q: The I-75 Carpet Discount Store has an annual demand of 10,000 yards of Super Shag carpet. The annual…
A: Given information is: The I-75 Carpet Discount Store has an annual demand of 10,000 yards of Super…
Q: ulldogs Inc. expects to use 48,000 boxes of chocolate per year costing P12 per box. Inventory…
A: The total variable cost of production refers to the production cost that changes with the change in…
Q: Each year the Alma Vacuum Company (AVC) manufactures 35,000 of its Supe Duper Dirt Grabber carpet…
A: Option D is the Correct Answer i.e 10,000
Q: costs approximately $ 60. a. Which order amount would result in the lowest annual purchasing and…
A: Please see the next step for solution:-
Q: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The…
A: Formula: Annual Ordering cost units = Plastic housing units each year / Current year plastic housing…
Q: The soft goods department of a large department store sells 175 units per month of a certain large…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: Green Tees, an on line retailer of t-shirts, orders 100,000 t-shirts per year from its manufacturer.…
A: Ordering Cost is a type of expenditure used in computation of Economic Order Quantity (EOQ). It…
Q: Race One Motors is an Indonesian car manufacturer. At its largest manufacturing facility, in…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: ABC Corporation resells one type of candle. It has 250 working days. Each day, it sells an average…
A: SOLUTION-1 # CALCULATION OF FORECASTED HOLDING COST/CARRYING COST- A-CALCULATION OF ORDER…
Q: ABC Corporation resells one type of candle. It has 250 working days. Each day, it sells an average…
A: The EOQ is a company's optimum order quantity that reduces overall costs associated with purchasing,…
Q: Advance Auto’s generator production operation, which is operated at a constant rate will require…
A: Formulae to be used in Step 2 are as follows: 1. EOQ = √(2 * D * S) / H where D = Annual Demand…
Q: TS Co has daily demand for ball bearings of 40 a day for each of the 250 working days (50 weeks) of…
A: We have the following information: TS Co has daily demand for ball bearings of 40 a day for each of…
Q: Bell Computers purchases integrated chips at $350 per chip. The holding cost is $36 per unit per…
A:
Q: WZY processing company uses 2,400 units of a product per year on a continuous basis. The product…
A: Solution A- EOQ= 2×A×O/C A= Annual demand O= ordering cost C= Carrying cost EOQ=2×2400×252.05/60…
Q: Clothes, Inc., has an average annual demand for red, medium polo shirts of 25,000 units. The cost of…
A: Cost accounting is one of the important branch of accounting. Under this branch, all type of costs…
Q: One of the bulk raw beverages, which Blanchard buys, is gin. Assume that the cost of purchasing…
A: The question is related to Inventory Management. The Economic Order Quantity is that level of…
Q: Wilson Publishing Company produces books for the retail market. Demand for a current book is…
A: Daily demand (d) Annual demand /no.of working days 7400/250 29.6 copies Daily production (p) Annual…
Q: A supplier sells Hipoint-brand pens to stationary shops. The annual demand is approximately 24,000…
A: The question is based on the concept of Cost Accounting. As per the Bartleby guidelines we are…
Q: Sawtooth Industries uses an economic order quantity (EOQ) model to manage its inventory investment.…
A: Economic order quantity represents the number of units that should be ordered by the entity in each…
Q: Corporation resells one product to a small isolated community. It sells an average of 60 sacks, but…
A:
Q: Jumbo Company uses 1,100 units of an particular item each year. Carrying the item in inventory costs…
A: Information Provided: Order cost = $150 Carrying cost = $200 Operating days = 250 Total usage = 1100…
The Metropolitan Book Company purchases paper from the Atlantic Paper Company. Metropolitan produces magazines and paperbacks that require 1,215,000 pounds of paper per year. The cost per order for the company is $1,200; the cost of holding 1 pound of paper in inventory is $0.08 per year. Determine the following.
- The economic order quantity
- The minimum total annual cost
- The optimal number of orders per year
- The optimal time between orders.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
- 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 annual ordering cost. 2. Compute the annual carrying cost. 3. Compute the cost of Ottiss current inventory policy. Is this the minimum cost? Why or why not?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)Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit of $360. The companys monthly fixed expenses are $72,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of January when they will sell 500 units. How many units will Kerr need to sell in order to realize a target profit of $120,000? What dollar sales will Kerr need to generate in order to realize a target profit of $120,000? Construct a contribution margin income statement for the month of June that reflects $600,000 in sales revenue for Kerr Manufacturing.
- Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The companys monthly fixed expenses are $180,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. How many units will Cadre need to sell in order to realize a target profit of $300,000? What dollar sales will Cadre need to generate in order to realize a target profit of $300,000? Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of $30. The companys monthly fixed expenses are $22,500. What is the companys break-even point in units? What is the companys break-even point in dollars? Construct a contribution margin income statement for the month of September when they will sell 900 units. How many units will Maple need to sell in order to reach a target profit of $45,000? What dollar sales will Maple need in order to reach a target profit of $45,000? Construct a contribution margin income statement for Maple that reflects $150,000 in sales volume.
- Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)Marlin Motors sells a single product with a selling price of $400 with variable costs per unit of $160. The companys monthly fixed expenses are $36,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of November when they will sell 130 units. How many units will Marlin need to sell in order to realize a target profit of $48,000? What dollar sales will Marlin need to generate in order to realize a target profit of $48.000? Construct a contribution margin income statement for the month of February that reflects $200,000 in sales revenue for Marlin Motors.
- NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Based solely on financial factors, explain why NoFat should accept or reject PUs special sales offer.NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Assume for this question that NoFat rejected PUs special sales offer because the 2.20 price suggested by PU was too low. In response to the rejection, PU asked NoFat to determine the price at which it would be willing to accept the special sales offer. For its regular sales, NoFat sets prices by marking up variable costs by 10%. If Allyson decides to use NoFats 10% markup pricing method to set the price for PUs special sales offer, a. Calculate the price that NoFat would charge PU for each pound of olestra. b. Calculate the relevant profit that NoFat would earn if it set the special sales price by using its markup pricing method. (Hint: Use the estimate of relevant costs that you calculated in response to Requirement 1b.) c. Explain why NoFat should accept or reject the special sales offer if it uses its markup pricing method to set the special sales price.NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Assume for this question that Allysons relevant analysis reveals that NoFat would earn a positive relevant profit of 10,000 from the special sale (i.e., the special sales alternative). However, after conducting this traditional, short-term relevant analysis, Allyson wonders whether it might be more profitable over the long term to downsize the company by reducing its manufacturing capacity (i.e., its plant machinery and plant facility). She is aware that downsizing requires a multiyear time horizon because companies usually cannot increase or decrease fixed plant assets every year. Therefore, Allyson has decided to use a 5-year time horizon in her long-term decision analysis. She has identified the following information regarding capacity downsizing (i.e., the downsizing alternative): The plant facility consists of several buildings. If it chooses to downsize its capacity, NoFat can immediately sell one of the buildings to an adjacent business for 30,000. If it chooses to downsize its capacity, NoFats annual lease cost for plant machinery will decrease to 9,000. Therefore, Allyson must choose between these two alternatives: Accept the special sales offer each year and earn a 10,000 relevant profit for each of the next 5 years or reject the special sales offer and downsize as described above. Assume that NoFat pays for all costs with cash. Also, assume a 10% discount rate, a 5-year time horizon, and all cash flows occur at the end of the year. Using an NPV approach to discount future cash flows to present value, a. Calculate the NPV of accepting the special sale with the assumed positive relevant profit of 10,000 per year (i.e., the special sales alternative). b. Calculate the NPV of downsizing capacity as previously described (i.e., the downsizing alternative). c. Based on the NPV of Requirements 5a and 5b, identify and explain which of these two alternatives is best for NoFat to pursue in the long term.