23 Jul WHAT ARE THE TOTAL COSTS IF THE ORDER QUANTITY IS THE EOQ?
Start with the Show more This is from Financial Management: Theory and Practice 14th edition Web Chapter 28 Start with the partial model in the file Ch28 P03 Build a Model.xls on the textbooks Web site. The following inventory data have been established for the Adler Corporation. (1) Orders must be placed in multiples of 100 units. (2) Annual sales are 338000 units. (3) The purchase price per unit is $3. (4) Carrying cost is 20% of the purchase price of goods. (5) Cost per order placed is $24. (6) Desired safety stock is 14000 units; this amount is on hand initially. (7) Two weeks are required for delivery. a. What is the EOQ? b. How many orders should the firm place each year? c. At what inventory level should a reorder be made? Hint: Reorder point = (Safety stock + Weeks to deliver Weekly usage) Goods in transit. d. Calculate the total costs of ordering and carrying inventories if the order quantity is (1) 4000 units (2) 4800 units or (3) 6000 units. What are the total costs if the order quantity is the EOQ? e. What are the EOQ and total inventory costs if the following were to occur? (1) Sales increase to 500000 units. (2) Fixed order costs increase to $30; sales remain at 338000 units. (3) Purchase price increases to $4; sales and fixed costs remain at original values. Show less
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