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.

Required:

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

77)

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.

Required:

Determine the annual demand, the cost of placing an order, the annual carrying cost of

one unit, and the economic order quantity.

78)

 

 

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