Answered: A supplier sells Hipoint-brand pens to…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter5: Inventories And Cost Of Goods Sold

Section: Chapter Questions

Problem 5.4DC

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Question 3:
A supplier sells Hipoint-brand pens to stationary shops. The annual demand is
approximately 24,000 pens. The supplier pays SR5 for each pen and estimates that the
annual holding cost is 30 percent of the pen's value. It costs approximately SR350 to place
an order. The supplier currently buys 1000 pens per order
i. Determine the annual ordering and inventory cost (in SR) for current order
quantity.
ii. Determine the economic order quantity (EOQ).
iii. Determine the total annual cost for the EOQ

Transcribed Image Text:Question 3: A supplier sells Hipoint-brand pens to stationary shops. The annual demand is approximately 24,000 pens. The supplier pays SR5 for each pen and estimates that the annual holding cost is 30 percent of the pen's value. It costs approximately SR350 to place an order. The supplier currently buys 1000 pens per order i. Determine the annual ordering and inventory cost (in SR) for current order quantity. Determine the economic order quantity (EOQ). Determine the total annual cost for the EOQ ii. iii. Question 4 An electronics shop sells 6000 headphones in a year and the sales is relatively constant throughout the year. These headphones are purchased for SR 20.00 each, and the lead time is three days. The holding cost per headphone per year is 10% of the unit cost and the ordering cost per order is SR 75. There are 300 working days per year. Calculate the following: (i) What is the annual holding cost? (ii) In minimizing the cost, how many orders would be made each year? (iii) Given the EOQ, what is the total annual inventory cost (including purchase cost)? (iv) What is the time between orders? (v) What is the ROP?

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