Zen Inc. uses one raw material type in its manufacturing process. It needs 3,750 kilos of this material each month. It incurs P500 each time when making and receiving orders. Annual carrying cost per unit costs P15 in warehousing and P5 in financing costs. If Zen purchases

Zen Inc. uses one raw material type in its manufacturing process. It needs 3,750 kilos of this material each month. It incurs P500 each time when making and receiving orders. Annual carrying cost per unit costs P15 in warehousing and P5 in financing costs. If Zen purchases

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 12EA: Markson and Sons leases a copy machine with terms that include a fixed fee each month of $500 plus a...

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Question

Zen Inc. uses one raw material type in its manufacturing
process. It needs 3,750 kilos of this material each month.
It incurs P500 each time when making and receiving
orders. Annual carrying cost per unit costs P15 in
warehousing and P5 in financing costs. If Zen purchases
1,000 kilograms each time, how much lower would the
annual cost be if Zen would now follow the EOQ model?

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