Bad Dawg produces pork sausages annually which requires 0.2 kilogram of raw material. The company produces...
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Bad Dawg produces pork sausages annually which requires 0.2 kilogram of raw material. The company produces and sells 800,000 units of the product annually. The cost to place a single order is $30 per hour and the annual carrying cost of inventory is 4% per annum. The normal time to place an individual order is four (4) hours. Currently, the company orders ten times per year. The material is currently bought from its supplier for $60 per kilogram. Required: (a) Calculate the Economic Order Quantity (EOQ). (4 marks) (8 marks) (b) Calculate the total cost based on the EOQ and at the current order level. (c) Calculate the cost savings if the entity adopted the EOQ model instead of using the current order size. (1 mark) (d) State two importance of inventory management. (2 marks) Bad Dawg produces pork sausages annually which requires 0.2 kilogram of raw material. The company produces and sells 800,000 units of the product annually. The cost to place a single order is $30 per hour and the annual carrying cost of inventory is 4% per annum. The normal time to place an individual order is four (4) hours. Currently, the company orders ten times per year. The material is currently bought from its supplier for $60 per kilogram. Required: (a) Calculate the Economic Order Quantity (EOQ). (4 marks) (8 marks) (b) Calculate the total cost based on the EOQ and at the current order level. (c) Calculate the cost savings if the entity adopted the EOQ model instead of using the current order size. (1 mark) (d) State two importance of inventory management. (2 marks)
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Economic Order Quantity 2000 units Working notes Calculation of Economic Ordering Quantit... View the full answer
Related Book For
Essentials of Business Analytics
ISBN: 978-1285187273
1st edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann, David Anderson, Dennis Sweeney, Thomas Williams
Posted Date:
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