Economic Order Quantity (EOQ): Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size. To compute: The optimum order quantity using EOQ model.

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Answer 1

Question

Chapter 20, Problem 20.33P

1.

To determine

Economic Order Quantity (EOQ):

Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.

To compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

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Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 40,000 ceiling fans and 70,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $56 $17 Unit variable cost $13 $8 Direct fixed cost $21,200 $43,000 Common fixed selling and administrative expenses total $98,000. Required: Question Content Area 1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)?Sales mix of ceiling fans to table fans = ___________ : ______________ 2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Round your intermediate calculations and final answers to the nearest whole number. Break-even ceiling fans _______ Break-even table fans ______ 3. Prepare a contribution-margin-based income…

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An organisation manufactures a single product. The following information with regard to the raw material needed in the production process is supplied to you: Normal delivery time: 2.5 weeks Maximum delivery time: 3.5 weeks Normal usage: 52 000 units per year Purchase price per unit: R8.50 Cost of placing an order: R18.00 Interest rate: 2% per year Storing cost per unit: R2.50 a). Calculate the safety stock b). Calculate the lead time c). Calculate the EOQ. d). Calculate the re-order point if the organisation does not keep safety stock. e). Calculate the re-order point if the organisation has a policy to keep safety stock. f). Calculate the safety stock that should be kept by the organisation.

Answer 2

Question

Chapter 20, Problem 20.33P

1.

To determine

Economic Order Quantity (EOQ):

Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.

To compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

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Answer 3

Question

Chapter 20, Problem 20.33P

1.

To determine

Economic Order Quantity (EOQ):

Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.

To compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

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Answer 4

Question

Chapter 20, Problem 20.33P

1.

To determine

Economic Order Quantity (EOQ):

Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.

To compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

Expert Solution & Answer

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Answer 5

Chapter 20, Problem 20.33P

1.

To determine

Economic Order Quantity (EOQ):

Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.

To compute: The optimum order quantity using EOQ model.

2. a.

To determine

To compute: The number of order per year.

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

Answer 6

Chapter 20, Problem 20.33P

1.

To determine

Economic Order Quantity (EOQ):

Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.

To compute: The optimum order quantity using EOQ model.

Answer 7

Chapter 20, Problem 20.33P

1.

To determine

Economic Order Quantity (EOQ):

Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.

To compute: The optimum order quantity using EOQ model.

Answer 8

2. a.

To determine

To compute: The number of order per year.

Answer 9

2. a.

To determine

To compute: The number of order per year.

Answer 10

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

Answer 11

2.b.

To determine

To compute: The annual relevant total cost of ordering and carrying inventory.

Answer 12

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

Answer 13

3.

To determine

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

Answer 14

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

Answer 15

4.

To determine

To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.

Answer 16

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Answer 17

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Answer 18

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Answer 19

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Solution Summary: The author explains that economic order quantity is the quantity of order that is purchased from supplier at a time to reduce the carrying and ordering cost of inventory.

To compute: The number of order per year.

To compute: The annual relevant total cost of ordering and carrying inventory.

To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.

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Chapter 20 Solutions