The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information: Annual demand for denim cloth 40,700 yards Ordering cost per purchase order $185 Carrying cost per year 10% of purchase costs Safety-stock requirements = None Cost of denim cloth $11 per yard The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week). Q. Calculate the number of orders that will be placed each year.

The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information: Annual demand for denim cloth 40,700 yards Ordering cost per purchase order $185 Carrying cost per year 10% of purchase costs Safety-stock requirements = None Cost of denim cloth $11 per yard The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week). Q. Calculate the number of orders that will be placed each year.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information: Annual demand for denim cloth 40,700 yards Ordering cost per purchase order $185 Carrying cost per year 10% of purchase costs Safety-stock requirements = None Cost of denim cloth $11 per yard The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week). Q. Calculate the EOQ for denim cloth.
The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information: Annual demand for denim cloth 40,700 yards Ordering cost per purchase order $185 Carrying cost per year 10% of purchase costs Safety-stock requirements = None Cost of denim cloth $11 per yard The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week). Q. Calculate the reorder point for denim cloth
The Cloth Bonanza sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Cloth Banaza has collected the following information: Annual demand for denim cloth 29,250 yards Ordering cost per purchase order $195 Carrying cost per year 20% of purchase costs Safety-stock requirements None Cost of denim cloth $15 per yard The purchasing lead time is 2 weeks. The Cloth Banaza is open 250 days a year (50 weeks for 5 days a week). 1. Calculate the EOQ for denim cloth.…
The I-75 Carpet Discount Store in North Georgia stocks carpet in its warehouse and sells it through an adjoining showroom. The store keeps several brands and styles of carpet in stock; however, its biggest seller is Super Shag carpet. The store wants to determine the optimal order size and total inventory cost for this brand of carpet given an estimated annual demand of 10,000 yards of carpet, an annual carrying cost of $0.75 per yard, and an ordering cost of $150. The store would also like to know the number of orders that will be made annually and the time between orders (i.e., the order cycle) given that the store is open every day except Sunday, Thanksgiving Day, and Christmas Day (which is not on a Sunday) (311 days/yr). Determine the following: A. Determine the optimal order quantity. B. Determine the number of orders per year.C. Determine the time between orders.D. Determine the annual set-up cost.E. Determine the annual holding cost.F. What is the total inventory cost of the Q*…
Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the annual ordering cost. 2. Compute the annual carrying cost. 3. Compute the cost of Ottiss current inventory policy. Is this the minimum cost? Why or why not?
Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
Many different businesses employ markup on cost to arrive at a price. For each of the following situations, explain what the markup covers and why it is the amount that it is. a. Department stores have a markup of 100 percent of purchase cost. b. Jewelry stores charge anywhere from 100 percent to 300 percent of the cost of the jewelry. (The 300 percent markup is referred to as keystone.) c. Johnson Construction Company charges 12 percent on direct materials, direct labor, and subcontracting costs. d. Hamilton Auto Repair charges customers for direct materials and direct labor. Customers are charged 45 per direct labor hour worked on their job; however, the employees actually cost Hamilton 15 per hour.
The Laurel Creek Lawn Shop sells Fastgro Fertilizer. The annual demand for the fertilizer is 270,000 pounds. The cost to order the fertilizer from the Fastgro Company is $105 per order. The annual carrying cost is $0.25 per pound. The store operates with shortages, and the annual shortage cost is $0.70 per pound. Compute the optimal order size, minimum total annual inventory cost, and maximum shortage level.
A company established a branch to sell automobile seat covers. The company purchases these covers and stores them in a warehouse. The covers are then shipped from the warehouse to both the home office and the new branch, FOB (Free On Board) destination. Home office management is responsible for setting the transfer price of the covers charged to the branch. Per-unit costs of the covers are: $ 90.00 purchase price $ 2.50 shipping cost to warehouse $ 3.00 handling cost, including $1 allocated administrative overhead $ 3.50 shipping cost to branch, paid by home office According to the general transfer pricing formula given in the text, the minimum transfer price that home office should charge the branch is: Multiple Choice $92.50. $98.00. $93.50. $99.00. $96.00.
Bautista Company manufactures backpacks. A heavy-duty strap is one part that the company orders from an outside supplier. Information pertaining to the strap is as follows: Economic order quantity 6,300 units Average daily usage 315 units Maximum daily usage 375 units Lead time 4 days What is the reorder point assuming no safety stock is carried? What is the reorder point assuming that safety stock is carried?
Seas Beginning sells clothing by mail order. An important question is when to strike a customer from the company’s mailing list. At present, the company strikes a customer from its mailing list if a customer fails to order from six consecutive catalogs. The company wants to know whether striking a customer from its list after a customer fails to order from four consecutive catalogs results in a higher profit per customer. The following data are available: ■ If a customer placed an order the last time she received a catalog, then there is a 20% chance she will order from the next catalog. ■ If a customer last placed an order one catalog ago, there is a 16% chance she will order from the next catalog she receives. ■ If a customer last placed an order two catalogs ago, there is a 12% chance she will order from the next catalog she receives. ■ If a customer last placed an order three catalogs ago, there is an 8% chance she will order from the next…
True Value Producers manufactures rum cakes, andal CF Supplier's List Price which the following details are available: inventory includes three items for Raw Materials OPD Net Realisable Value Flour (bag) Sugar (bag) Raisins (boxes) 2$ 3 600 2 900 4 200 5 100 2 800 4 100 The company receives 2 %% trade discount from its suppliers and it also takes advantage of a 2% discount for prompt payment. : Calculate the value of raw materials that should be shown in inventory in the statement of financial position at year end.