Vallie Enterprise sells a product that cost $200 per unit and has a monthly demand of 500 units. The annual holding cost per unit is calculated as 2% of the unit purchase price. It costs the business $30 to place a single order. The maximum number of units sold for any one week is 150 and minimum sales 80 units. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. The EOQ model is appropriate. i) What is the cost minimizing solution for this product each year? ii)Determine the re-order level, minimum inventory level and maximum inventory level for the product.
Vallie Enterprise sells a product that cost $200 per unit and has a monthly demand of 500 units. The annual holding cost per unit is calculated as 2% of the unit purchase price. It costs the business $30 to place a single order. The maximum number of units sold for any one week is 150 and minimum sales 80 units. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. The EOQ model is appropriate. i) What is the cost minimizing solution for this product each year? ii)Determine the re-order level, minimum inventory level and maximum inventory level for the product.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Vallie Enterprise sells a product that cost $200 per unit and has a monthly demand of 500 units. The annual holding cost per unit is calculated as 2% of the unit purchase price. It costs the
business $30 to place a single order.
The maximum number of units sold for any one week is 150 and minimum sales 80 units. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. The
EOQ model is appropriate.
i) What is the cost minimizing solution for this product each year?
ii)Determine the re-order level, minimum inventory level and maximum inventory level for the product.
![All Things Auto are retailers who purchase and sell vehicle parts & accessories, including batteries. The business
uses a perpetual inventory system and began the last quarter of 2020 with merchandise inventory of 10 batteries
of the "DieHard" brand at a total cost of $168,200.
The following transactions, relating to the "DieHard" brand were completed during the quarter:
October 5
Purchased 15 batteries at a cost of $17,020 each.
October 14
October 22
November 10 Sold 15 batteries to Orion Auto Ltd and 10 batteries to Brown's Auto Detailing at a price of
Sold 18 batteries at $22,250 per battery
Purchased 24 batteries at a cost of $18,175 each but the supplier gave a 4% quantity discount.
$23,990 each.
| November 12 Owing to an increased demand for this brand of batteries, 30 batteries were purchased on
account at a cost of $17,612 each. In addition, All Things Auto paid $288 in cash on each
battery to have the inventory shipped from the vendor's warehouse to their location.
|November 27 Sold 23 batteries which yielded total sales revenue of $576,840. (8 of these batteries were
sold on account to Middletown Fuel & Auto Accessories a longstanding customer)
|November 30 A customer, to whom 5 batteries were sold at the end of the business day on November 27,
returned 2 units, as they were of the "Duralast" brand.
December 2
In preparation for the festive season, All Things purchased 25 batteries at a total cost of
$474,500.
December 15 5 of the batteries purchased on December 2 were returned to the supplier, as the poles were
either corroded or otherwise badly damaged.
December 30 Sold 22 batteries to two customers (Omega Traders & Middleton Auto Accessories) at a
selling price of $26,950 each.
December 31 An actual count of inventory was carried out which revealed that there were 9 units of the
"DieHard" brand in the warehouse.
All purchases were on account and received on the dates stated.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe8954d39-cd86-46e6-aac4-b756089effa1%2F1fa11a6c-aca8-4f65-9f3b-d2e5600b1562%2Fu13g4c_processed.png&w=3840&q=75)
Transcribed Image Text:All Things Auto are retailers who purchase and sell vehicle parts & accessories, including batteries. The business
uses a perpetual inventory system and began the last quarter of 2020 with merchandise inventory of 10 batteries
of the "DieHard" brand at a total cost of $168,200.
The following transactions, relating to the "DieHard" brand were completed during the quarter:
October 5
Purchased 15 batteries at a cost of $17,020 each.
October 14
October 22
November 10 Sold 15 batteries to Orion Auto Ltd and 10 batteries to Brown's Auto Detailing at a price of
Sold 18 batteries at $22,250 per battery
Purchased 24 batteries at a cost of $18,175 each but the supplier gave a 4% quantity discount.
$23,990 each.
| November 12 Owing to an increased demand for this brand of batteries, 30 batteries were purchased on
account at a cost of $17,612 each. In addition, All Things Auto paid $288 in cash on each
battery to have the inventory shipped from the vendor's warehouse to their location.
|November 27 Sold 23 batteries which yielded total sales revenue of $576,840. (8 of these batteries were
sold on account to Middletown Fuel & Auto Accessories a longstanding customer)
|November 30 A customer, to whom 5 batteries were sold at the end of the business day on November 27,
returned 2 units, as they were of the "Duralast" brand.
December 2
In preparation for the festive season, All Things purchased 25 batteries at a total cost of
$474,500.
December 15 5 of the batteries purchased on December 2 were returned to the supplier, as the poles were
either corroded or otherwise badly damaged.
December 30 Sold 22 batteries to two customers (Omega Traders & Middleton Auto Accessories) at a
selling price of $26,950 each.
December 31 An actual count of inventory was carried out which revealed that there were 9 units of the
"DieHard" brand in the warehouse.
All purchases were on account and received on the dates stated.
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