Contreta Inc. is involved in the production of machine parts. The company uses 500,000 pounds of steel
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Contreta Inc. is involved in the production of machine parts. The company uses 500,000 pounds of steel annually. The current purchasing cost for steel is P2.20 per pound. The carrying cost for inventory is 20% of the purchase price. The cost of ordering steel is P1,000 per order. The company has decided to maintain a safety stock of 20,000 pounds. Delivery time per order is 10 days. The company works 365 days a year.
- 1. Determine the optimal EOQ
- 2. How many orders will be placed annually?
- 3. What is the inventory order point? (that is, at what level of inventory should a new order be placed)
- 4. What is the company's total (relevant) inventory costs for the year?
Hanah has P15million of sales; P2million of inventories; P3million of receivables and P1million of payable. Its cost of sales is 80% of sales, and it finance working capital with bank loans at an 8% rate.
- 1. What is Rosanna's cash conversion cycle?
- 2. If Rosanna could lower its inventories and receivables by 10% each, and increase its payable by 10%, all without affecting sales or cost of sales, what would be the new Cash conversion cycle
- 3. Following number 2 above, how much cash would be freed up?
Related Book For
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
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