Question: A company is using the Economic Order Quantity (EOQ) model to manage its inventories. Suppose its annual demand doubles, while the ordering cost per order

A company is using the Economic Order Quantity (EOQ) model to manage its inventories. Suppose its annual demand doubles, while the ordering cost per order and inventory holding cost per unit per year do not change. What will happen to the total annual variable cost? The annual variable cost includes the annual ordering cost and annual inventory holding cost?

a) It doubles.

b) It increases by 41.42%.

c) It remains the same.

d) The impact depends upon the value of the ordering cost.

e) It quadruples (increases by 400%).

Step by Step Solution

★★★★★

3.40 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Computation of the following Suppose If Demand doubles Daily demand 100 units Daily demand 200 un... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

68-B-M-A-C-M (512).xlsx

300 KBs Excel File

Students Have Also Explored These Related Managerial Accounting Questions!

What is the economic order quantity model?

A company uses the newsvendor model to manage its inventories and faces normally distributed demand with a coefficient of variation of 0.75. The company decides to order a quantity that exactly...

A company is thinking about changing its credit policy to speed up its cash collections. The present policy calls for a 2/10, net 30 cash discount The new policy would call for a 5/10, net 50 cash...

A company orders gears in conditions identical to those considered in the economic order quantity ( EOQ ) model in inventory control. The annual demand is 8 0 0 0 gears, the cost per order is 3 0 0...

A company is thinking about changing its credit policy to speed up its cash collections. The present policy calls for a 2/10, net 30 cash discount. The new policy would call for a 5/10, net 50 cash...

A company is thinking about changing its credit policy to speed up its cash collections. The present policy calls for a 2/10, net 30 cash discount The new policy would call for a 4/10, net 50 cash...

A company is thinking about changing its credit policy to speed up its cash collections. The present policy calls for a 2/10, net 30 cash discount. The new policy would call for a 4/10, net 50 cash...

I posted my question several times since yesterday please i need the right answer A company is thinking about changing its credit policy to speed up its cash collections. The present policy calls for...

At January 1, 2022, the assets of Crane Company were $1,020,000 and liabilities were $742,000. The balance in common stock was $131,000. During 2022, Crane earned revenue of $230,000 and had expenses...

Financial leverage can be helpful in that it stretches your equity, but it can be hurtful if you cannot make the payments to your lender. So, what can you learn from this investment in a real estate...

In the main memory, we found the values in the following locations Address 0 1 0 0 Address 0 x 1 0 1 Address 0 1 0 2 Address 0 1 0 3 B 9 A 5 2 A 1 F For question 1 and 2 , I expect to see a MARIE...

Discuss the color of state law requirement for a 1983 action.

Poole Corporation has collected the following information after its first year of sales. Net sales were $1,600,000 on 100,000 units; selling expenses $240,000 (40% variable and 60% fixed); direct...

TLR produces plastic that is used for injection molding applications such as gears for small motors. In 2010, the first year of operations, TLR produced 6,000 tons of plastic and sold 5,000 tons. In...

The McCune Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $3,900 per month. The other barbers are paid $1,900 per month. In addition, each barber is...

Which of the following statements is correct? The overall size of the derivatives worldwide is bigger than the size of all listed stocks Derivatives can only be used to hedge risks Of all traded...

How much should you deposit at the end of each month into an investment account that pays 6% compounded monthly to have $4 million when you retire in 44 years? How much of the $4 million comes from...

Please help? 4 The probability that a student has a Visa card (event V) is .82. The probability that a student has a MasterCard (event M) is .23. The probability that a student has both cards is .03....