Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.3WUE
Summary Introduction
To determine: The economic order quantity (EOQ).
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Problem Solving:
Lila Battle has determined that the annual demand for number 6 screws is 100,000 screws. Lila, who works in her brother’s hardware store, is in charge of purchasing. She estimates that it costs $10 every time an order is placed. This cost includes her wages, the cost of the forms used in placing the order, and so on. Furthermore, she estimates that the cost of carrying one screw in inventory for a year is one-half of 1 cent. Assume that the demand is constant throughout the year.
a. How many number 6 screws should Lila order at a time if she wishes to minimize total inventory cost?
b. How many orders per year would be placed? What would the annual ordering cost be?
c. What would the average inventory be? What would the annual holding cost be?
Hi, please help me with this problem. I hope I'd get all of the needed answers here. Please. Need asap. Thanks a lot.
***
Zesto Company order 480,000 packs of apple juice per year from a Marikina distributor. A two-dozen pack case of juice delivered to Zesto warehouse cost P48 including freight charges. The company borrows funds at 10 percent interest rate to finance its inventory. Zesto Company purchasing agent has calculated that it cost P150 to place an order for apple juice and that the annual carrying cost (electricity, insurance, handling ) is P.80 for each pack of juice.
Required:a. Determine the Economic Order Quantity.
b. Would you accept the offer if the Marikina distributor offered a 10% discount off the delivery price for minimum orders of P60,000 packs?
Create a First-year projected sales based on similar products in the same or other markets. My product is a Clay House fireplace.
600 people come to the store every day
1 out of 10 will enter the shop: 60 people/day
1 out of 5 people coming to the shop will buy: 12 sales/day
the average price of an item is $499 $5988 of sales/day
the shop is opened 30 days a month: $2,155,680 of sales/month
Chapter 15 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 15.1 - Why is working capital management one of the most...Ch. 15.1 - Prob. 15.2RQCh. 15.1 - Prob. 15.3RQCh. 15.2 - Prob. 15.4RQCh. 15.2 - Prob. 15.5RQCh. 15.2 - What are the benefits, costs, and risks of an...Ch. 15.2 - Prob. 15.7RQCh. 15.3 - Prob. 15.8RQCh. 15.3 - Briefly describe the following techniques for...Ch. 15.3 - Prob. 15.10RQ
Ch. 15.4 - Prob. 15.11RQCh. 15.4 - Prob. 15.12RQCh. 15.4 - What are the basic tradeoffs in a tightening of...Ch. 15.4 - Prob. 15.14RQCh. 15.4 - Prob. 15.15RQCh. 15.4 - Prob. 15.16RQCh. 15.5 - Prob. 15.17RQCh. 15.5 - What are the firms objectives with regard to...Ch. 15.5 - Prob. 15.19RQCh. 15.5 - Prob. 15.20RQCh. 15.5 - Prob. 15.21RQCh. 15 - EOQ analysis Thompson Paint Company uses 60,000...Ch. 15 - Learning Goal 4 ST15- 3 Relaxing credit standards...Ch. 15 - Learning Goal 2 E15-1 Everdeen Inc. has a 90-day...Ch. 15 - Learning Goal 2 E15-2 Icy Treats Inc. is a...Ch. 15 - Prob. 15.3WUECh. 15 - Forrester Fashions has annual credit sales of...Ch. 15 - Prob. 15.1PCh. 15 - Learning Goal 2 P15-2 Changing cash conversion...Ch. 15 - Learning Goal 3 P15-5 EOQ analysis Tiger...Ch. 15 - EOQ, reorder point, and safety stock Alexis...Ch. 15 - Prob. 15.7PCh. 15 - Prob. 15.8PCh. 15 - Prob. 15.9PCh. 15 - Relaxation of credit standards Lewis Enterprises...Ch. 15 - Initiating an early payment discount Gardner...Ch. 15 - Shortening the credit period A firm is...Ch. 15 - Lengthening the credit period Parker Tool is...Ch. 15 - Prob. 15.14PCh. 15 - Prob. 15.15PCh. 15 - Prob. 15.16PCh. 15 - Prob. 15.18P
Knowledge Booster
Similar questions
- Thames Assurance Company sells a variety of life and health insurance products. Recently, Thames developed a long-term care policy for sale to members of university and college alumni associations. Thames estimated that the sale and service of this type of policy would be subject to a 90 percent cumulative average-time learning curve model. Each unit consists of 350 policies sold. The first unit is estimated to take 1,000 hours to sell and service. Required: 1. Set up a table with columns for cumulative number of units, cumulative average time per unit in hours, and the cumulative total time in hours. Complete the table for 1, 2, 4, 8, 16, and 32 units. 2. Suppose that Thames revises its assumption to an 80 percent learning curve. How will this affect the amount of time needed to sell and service eight units? How do you suppose that Thames estimates the percent learning rate?arrow_forwardLean principles Bright Night, Inc., manufactures light bulbs. Its purchasing policy requires that the purchasing agents place each quarters purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest bidder receives the order for the next quarter (90 working days). To make its bulb products, Bright Night requires 36,000 pounds of glass per quarter. Bright Night received two glass bids for the third quarter, as follows: Central Glass Company: 30.00 per pound of glass. Delivery schedule: 36,000 (400 lbs. x 90 days) pounds at the beginning of July to last for 3 months. Ithaca Glass Company: 30.20 per pound of glass. Delivery schedule: 400 pounds per working day (90 days in the quarter). Bright Night accepted Central Glass Companys bid because it was the low-cost bid. Instructions 1. Comment on Bright Nights purchasing policy. 2. What are the additional (hidden) costs, beyond price, of Central Glass Companys bid? Why werent these costs considered? 3. Considering only inventory financing costs, what is the additional cost per pound of Central Glass Companys bid if the annual cost of money is 8%? (Hint: Determine the average value of glass inventory held for the quarter and multiply by the quarterly interest charge, then divide by the number of pounds.)arrow_forwardJill’s Custom Bags manufacturers and sells 12,000 customer designer bags per year, each requiring three yards of a specially manufactured fabric. These bags are sold evenly throughout the year. The materials for these bags require two months’ lead time. Jill desires to maintain a safety stock of sufficient material to meet one month’s demand. What is Jill’s reorder point?a. 3,000b. 6,000c. 9,000d. 12,000arrow_forward
- Feedastudent Ltd are developing a Gift food service for students. Market research has indicated that customers would be willing to pay £50 for the product. The company usually expect a profit margin of 10% on products. Fixed costs for marketing and promotion is expected to be £12,000 per year. The company expects orders for 3000 units this year. Food costs are expected to be £41 per unit. Packaging and administration costs are £2 per service. Required: a) Calculate whether Enterprise Ltd can expect to make a profit this year. b) A reduction in the fixed costs of £4,000 could be achieved but this would result in a reduction of expected sales to 2000 per year. Would this reduce the cost gap and be a more profitable solution? Alternatively, cheaper food costing only £38 could be used but this may affect its reputation and…arrow_forwardSHOW WORKING PLEASE . NO HANDWRITING The School Book Shop sells T Shirts emblazoned with the school’s name and logo. Theshirts cost $2,000 each and management estimates that 900 T Shirts will be sold during each month ofthe year. The annual holding cost for a unit of that inventory is estimated to be 1.5% of the purchaseprice. It costs the Book Shop $500 to place a single order.The maximum sale for the Book Shop for any one week is 300 shirts and minimum sales 150shirts. The supplier takes anywhere from 2 to 4 weeks to deliver the merchandise after the order isplaced.i) Determine the highest number of shirts that should be purchased by the Gift Shop in order tominimize stock administration cost.ii) What is the total stock administration costs?iii)Using the EOQ policy, determine the re-order level, minimum inventory level and maximuminventory level for the T Shirts.arrow_forward3. Aapki Humaari Beauty LLP requires 12000 units of Bear Shampoo annually as a part of its sales requirement, ordering one month usage at a time. Each shampoo bottle costs Rs 100.The ordering cost per order is Rs 50 and the carrying cost of the average inventory on a yearly basis is 10% You as an adviser to the company advise to buy the most economical order size. a. The company looks forward for your advice on understanding the concept of economic order size. b. Advise what should be desired quantity as per the economic purchase policy of the company and how much the company may save on account of ordering cost. Note : You can round off any number to lower side for the calculation purposearrow_forward
- Instruction: Please answer the following with complete solution and explanation. Thank you! 1. Summer Company offers a set of building blocks to customers who send in three (3) UPC codes from Summer cereal, along with P50.00. The blocks sets cost Summer P110 each to purchase and P60 each to mail to customers. During 20x1, Summer sold 1,000,000 boxes of cereal. The company expects 30% of the UPC codes to be sent in. During 20x1, 120,000 UPC codes are redeemed. Required: 1. What is the cost of estimated claims outstanding? 2. Prepare Summer’s December 31, 20x1 adjusting entry.arrow_forwardBrown Sporting Goods, inc. buys baseball at $10 per dozen from its wholesales. Brown buys 1,600 dozen every 2 months, Brown will order 6 times in one year. The firm incurs interest expense of 20% on its inventory investment. In addition, rent, insurance, and property tax per year for each dozen baseballs in the average inventory is $0.5. The cost involved in handling each purchase order is $3,000. Required: 1.Determine the optimal order quantity using the EOQ model. 2.Determine the relevant total costs of ordering and carrying costs.arrow_forward. Powered by Koffee (PBK) is a new campus coffee store. PBK uses 50 bags of whole bean coffee every month, and demand is steady throughout the year. PBK has signeda contract to purchase its coffee from a local supplier, Phish Roasters, for a price of $25 per bag and an $85 fixed cost for every delivery independent of the order size. PBK incurs an inventory holding cost of 24% per year. a. If PBK orders 125 bags at a time, how many orders will it place per year?b. What is PBK’s annual inventory holding cost per bag? c. If PBK orders 200 bags at a time, what is its inventory holding cost per year? d. What order quantity minimizes PBK’s ordering and holding costs per year?If PBK chooses an order quantity to minimize ordering and holding costs, what is its ordering and holding costs per year expressed as a percentage of its annual purchase cost? A South American import/export company has offered PBK a deal. PBK can buy a year’s worth of coffee directly from South America for $20 per bag…arrow_forward
- Black Diamond Company produces snow skis. Each ski requires 2 pound of carbon fiber. The company’s management predicts that 5,000 skis and 6.000 pounds of carbon fiber will be in inventory on June 30 of the current year and that 150,000 skis will be sold during the next (third) quarter. A set of two skis sells for $300. Management wants to end the third quarter with 3,500 skis and 4,000 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $15 per pound. Each ski requires 0.5 hours of direct labor at $20 per hour. Variable overhead is applied at the rate of $8 per direct labor hour. The company budgets fixed overhead of $1,782,000 for the quarter. Required Prepare the third-quarter production budget for skis. Prepare the third quarter direct materials (carbon fiber) budget; include the dollar cost of purchases. Prepare the direct labor budget for the third quarter. Prepare the factory overhead budget for the third quarter.arrow_forwardMcNally Corporation makes a special ski. Next year, McNally expects to produce 20,000 pairs of skis. Seven pounds of fiberglass are required to make each pair of skis. The company expects to have 21,000 pounds of fiberglass in inventory at the end of this year and next year wants to have an ending inventory of fiberglass of 18,000 pounds. How much fiberglass does the company expect to purchase next year? Multiple Choice 140,000 pounds 137,000 pounds None of these. 160,000 pounds 158,000 poundsarrow_forwardHow do I calculate the economic order quantity (EOQ) per annum? New West Secondary School purchases 700 math sets per annum. The cost of each math set is $80. Each set is sold for $100. The cost of placing a single order is $45. The holding cost is 11% of the unit purchase price.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub