Aravan Company purchases 4,000 units of Product Beta each year in lots of 400 units per order.

Question:

Aravan Company purchases 4,000 units of Product Beta each year in lots of 400 units per order. The cost of placing one order is $20, and the cost of carrying one unit of product in inventory for a year is $4.

Required:

1. What is the EOQ for Product Beta?

2. How many orders for Product Beta will Aravan place per year under the EOQ policy?

3. What is the total ordering cost of Beta for a year under the EOQ policy?

4. What is the total carrying cost of Beta per year under the EOQ policy?

5. What is the total cost of Aravan’s inventory policy for Beta per year under the EOQ policy?

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Cornerstones of Managerial Accounting

ISBN: 978-0324660135

3rd Edition

Authors: Mowen, Hansen, Heitger

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Question Posted: Feb 04, 2012 12:46 AM

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Aravan Company purchases 4,000 units of Product Beta each year in lots of 400 units per order.

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1 EOQ 200 units 2 Number of orders 20 orders per year 3 Total ordering cost Number of orders Cost ...View the full answer

Cornerstones of Managerial Accounting

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