77) Due to unprecedented growth during the year, Flowers by Kelly decided to use some of its
surplus cash to increase the size of several inventory order quantities that had been
previously determined using an EOQ model.
Identify whether increasing the size of inventory orders will increase, decrease, or have no
effect on each of the following items.
________ a. Average inventory
________ b. Cost of goods sold
________ c. Number of orders per year
________ d. Total annual carrying costs
________ e. Total annual carrying and ordering costs
________ f. Total annual ordering costs
78) Rockhampton Company was in the process of completing the quarterly planning for the
purchasing department when a major computer malfunction lost most of his data. For
direct material QBJ, he was able to recover the following:
Average inventory level of QBJ 400
Orders per year 80
Average daily demand 96
Working days per year 250
Annual ordering costs $4000
Annual carrying costs $6000
Ralph purchases at the EOQ quantity level.
Determine the annual demand, the cost of placing an order, the annual carrying cost of
one unit, and the economic order quantity.