A farmer sells every week 18 chickens. The supplier charges $60 per unit. The cost of placing
Question:
A farmer sells every week 18 chickens. The supplier charges $60 per unit. The cost of placing an order (S) with the supplier is $45. The annual holding cost (H) is 25% of a feeder’s value, based on operations 52 weeks per year. The management chose a 390-unit lot size (Q) so that new orders could be placed less frequently.
What is the annual demand in units (D) for the inventory item?
Calculate the holding cost.
What is the annual cycle-inventory cost (C) of the current policy of using a 390-unit lot size?
Indicate in the following curve Q* and the corresponding annual cost.
Would a lot size of 465 be better? Justify in the following curve using Economic Ordering Quantity (EOQ) method.
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young