EcoFresca (EF) is a distributor of a popular bottled water brand, which they sell for $2.50 per
Question:
EcoFresca (EF) is a distributor of a popular bottled water brand, which they sell for $2.50 per bottle. The average weekly demand for these bottled water units is 900 bottles. They source their bottled water from AquaPurify. AquaPurify offers bottled water to EF at $1.80 per bottle and charges a flat fee of $75 per order for shipping and handling. EF utilizes the Economic Order Quantity (EOQ) as their fixed order size. Assume an opportunity cost of capital and all other inventory costs at 3.5% annually and that there are 48 weeks in a year.
a. Determine the optimal quantity of bottled water units that EF should order at a time.
b. Calculate EF’s total annual cost for one year.
c. Compute EF’s total holding cost for one year.
d. Find EF’s weekly inventory turns.
e. Determine the cycle time.
f. Imagine that AquaPurify offers to sell a year’s supply of bottled water units to EF for $43,200 in a single shipment with no delivery fee. Should EF accept this offer? Explain your decision.
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey