Athens Inc. are using a purchased component in their own assembly. The production runs 52 weeks/year and
Question:
Athens Inc. are using a purchased component in their own assembly. The production runs 52 weeks/year and the consumption of the component is evenly distributed over the year. The purchase price is $23. The inventory carrying cost is 20%. The administrative cost for each purchase is $85. The component can only be purchased in regular tens (i.e. 10, 20, 30, 40 et c). The demand is as follows:
Week 1 2 3 4 5 6 7 8 9 10 11 12
Demand (pieces) 19 24 21 18 23 14 31 19 21 20 21 21
Athens Inc. want to calculate the Economic Order Quantity. How much shall they order each time, assume that the 12 weeks of demand above is representative for the full year.
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer