The BOF Company has in the past ordered raw material X in quantities of 3,125 units,...
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The BOF Company has in the past ordered raw material "X" in quantities of 3,125 units, which is 13 weeks supply. Management has decided to change over to an ordering system based on economic order quantities. Assume the following information pertaining to the company's purchasing and production activity: Inventory usage rate: Lead time: Unit price: Order cost: Carrying cost: 120-130 units per week 2-4 weeks $1.50 $5 per order $0.50 per unit per year Required: (a) Calculate the Economic Order Quantity (EOQ) using the formula (b) Calculate the re-order level (c) Calculate the maximum level (d) Calculate the minimum level (e) What is the total annual order cost and carrying cost at the EOQ? (f) How much would the company save by adopting the EOQ model? The BOF Company has in the past ordered raw material "X" in quantities of 3,125 units, which is 13 weeks supply. Management has decided to change over to an ordering system based on economic order quantities. Assume the following information pertaining to the company's purchasing and production activity: Inventory usage rate: Lead time: Unit price: Order cost: Carrying cost: 120-130 units per week 2-4 weeks $1.50 $5 per order $0.50 per unit per year Required: (a) Calculate the Economic Order Quantity (EOQ) using the formula (b) Calculate the re-order level (c) Calculate the maximum level (d) Calculate the minimum level (e) What is the total annual order cost and carrying cost at the EOQ? (f) How much would the company save by adopting the EOQ model?
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a Calculate the Economic Order Quantity EOQ using the formula Given Order cost 5 per order Average w... View the full answer
Related Book For
Auditing A Practical Approach with Data Analytics
ISBN: 978-1119401742
1st edition
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
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