Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 20, Problem 8E
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.
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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.
Compute the economic order quantity for oats.
Compute the carrying and ordering costs for the EOQ.
RYX Manufacturing Company uses 1,000 units of Chip annually in its production. Order costs consist of P10 for placing a long-distance call to make the order and P40 for delivering the order by truck to the company warehouse. Each Chip costs P100 and the carrying costs are estimated at 15.625% of the inventory cost.
What is the economic order quantity for Chip? _______________.
RYX Manufacturing Company uses 1,000 units of Chip annually in its production. Order costs consist of P10 for placing a long-distance call to make the order and P40 for delivering the order by truck to the company warehouse. Each Chip costs P100 and the carrying costs are estimated at 15.625% of the inventory cost.
What is the total order cost? _______________.
Chapter 20 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 20 - What are ordering costs? What are setup costs?...Ch. 20 - Explain why, in the traditional view of inventory,...Ch. 20 - Discuss the traditional reasons for carrying...Ch. 20 - Prob. 4DQCh. 20 - Explain how safety stock is used to deal with...Ch. 20 - Prob. 6DQCh. 20 - What approach does JIT take to minimize total...Ch. 20 - One reason for inventory is to prevent shutdowns....Ch. 20 - Prob. 9DQCh. 20 - Explain how long-term contractual relationships...
Ch. 20 - What is a constraint? An internal constraint? An...Ch. 20 - Prob. 12DQCh. 20 - Prob. 13DQCh. 20 - Explain how lowering inventory produces better...Ch. 20 - Prob. 15DQCh. 20 - Thomas Corporation produces heating units. The...Ch. 20 - Sterling Corporation has an EOQ of 5,000 units....Ch. 20 - Patz Company produces two types of machine parts:...Ch. 20 - Prob. 4CECh. 20 - See Cornerstone Exercise 20.4. Fisher Company has...Ch. 20 - Ottis, Inc., uses 640,000 plastic housing units...Ch. 20 - Ottis, Inc., uses 640,000 plastic housing units...Ch. 20 - Melchar Company uses 78,125 pounds of oats each...Ch. 20 - Prob. 9ECh. 20 - Morrison Manufacturing produces casings for sewing...Ch. 20 - Morrison Manufacturing produces casings for sewing...Ch. 20 - Refer to Exercise 20.10. Assume the economic lot...Ch. 20 - Eyring Manufacturing produces a component used in...Ch. 20 - Hales Company produces a product that requires two...Ch. 20 - Many companies have viewed JIT as a panaceaa...Ch. 20 - Prob. 16ECh. 20 - Prob. 17ECh. 20 - Which of the following describes the economic...Ch. 20 - The economic order quantity (EOQ) for Part X15 is...Ch. 20 - A JIT inventory management system maintains which...Ch. 20 - For the theory of constraints, which of the...Ch. 20 - A dedicated pharmaceutical plant uses the theory...Ch. 20 - Prob. 23PCh. 20 - Burnett Company produces two types of gears: Model...Ch. 20 - Taylor Company produces two industrial cleansers...Ch. 20 - Prob. 26PCh. 20 - Calen Company manufactures and sells three...Ch. 20 - Confer Company produces two different metal...Ch. 20 - Pratt Company produces two replacement parts for a...Ch. 20 - Bountiful Manufacturing produces two types of bike...
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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?arrow_forwardThis 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)arrow_forwardOttis, 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?arrow_forward
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