The manager at Robert's Cigars wants to determine the lowest cost order policy given the following purchase discounts offered: cigar costs are $4 each for orders less than 500; $3.50 each for orders of 500 - 1000; and $3.25 each for orders greater than 1000. The order cost = $75, annual demand forecast = 5500 cigars, inventory carrying cost = 30% per year.
What will be an ideal response?
| Step 1 | Determine the 3 EOQ's- For $3.50 cigars, EOQ = |
| Step 2 | Calculate the total annual inventory costs for the $3.50 and the $3.25 cigars: TIC3.50 = O+I+P = |
So, the lowest cost order policy is to order 1001 cigars at a time, pay $3.25 per cigar, for a total inventory cost of $18,775.08 |
= 829 (infeasible, since EOQ > 500.
= 886 (feasible range, since EOQ > 500 but < 1000.
(75) + 
(.3)(3.50) + 5500(3.50) = $465.58 + $465.15 + $19,250 = $20,180.73
?
You might also like to view...
On December 31, Strike Company traded-in one of its batting cages for another one that has a cost of $500,000.Strike receives a trade-in allowance of $11,000 . The old equipment had an initial cost of $215,000 and hasaccumulated depreciation of $185,000 . Depreciation has been recorded up to the end of the year. The differencewill be paid in cash. What is the amount of the gain or loss on this
transaction? a. loss of $11,000 b. no loss or gain will be recorded c. loss of $19,000 d. gain of $11,000
Which of the following is a possible indicator of concealment in a bankruptcy or divorce fraud?
a. Increases in operating losses that are not explained by economic factors b. The size of orders placed on credit and the credit balances with suppliers suddenly and dramatically decrease c. A sudden change in management is made without public notice d. The company sells goods at large discounts
Which of the following is NOT one of the problems associated with traditional telephone interviews?
A) mistakes in administering the questions B) insufficient call back for not-at-homes C) dishonest interviewers D) quality control being limited E) the expense of telephone interviewing
When deciding whether to keep or replace a fixed asset, the asset's carrying value could be relevant to the decision
Indicate whether the statement is true or false