Question

In: Advanced Math

Each year, Florida's Best Salad Dressing, Inc. (FBSD) purchases 50,000 gallons of extra virgin olive oil....

Each year, Florida's Best Salad Dressing, Inc. (FBSD) purchases 50,000 gallons of extra virgin

olive oil. Ordering costs are $80.00 per order, and the carrying cost, as a percentage of inventory

value is 80 percent. The purchase price to FBSD is $0.50 per gallon. FBSD’s management currently

orders the EOQ each time an order is placed. No safety stock is carried. The supplier is now offering a

quantity discount of $0.03 per gallon if FBSD orders 10,000 gallons at a time. What is the net benefit

in dollars if FBSD takes the discount?

Solutions

Expert Solution

EOQ=

     =  

    =

    =

   =4472.13

NO OF ORDERS=50000/4472.13

                         =11.18

TOTAL COST=(50,000/4472.13)($80)+($10,000/2)($0.50)(0.80)

                            =(11.18)(80)+(5000)(0.4)

                            =894.4+2000

                              =$2894.4

iF THE FIRM ORDER 10,000 GALLONS AT A TIME

TC=(50,000/10,000)($80)+($10,000/2)($0.47)(0.80)

     =(5)(80)+(5000)(0.376)

     =400+1880

   =$2280

THEREFORE COST INCREASE BY 2280-2894.4=-614.4

THE BENEFIT IS (0.03)(50,000)=$1500

Thus the NET BENEFIT =$1500+$614.4=$2114.4

Colby Messinger answered 2 years ago
Next > < Previous

Related Solutions

Each year, Florida's Best Salad Dressing, Inc. (FBSD) purchases 50,000 gallons of extra virgin olive oil....
Each year, Florida's Best Salad Dressing, Inc. (FBSD) purchases 50,000 gallons of extra virgin olive oil. Ordering costs are $80.00 per order, and the carrying cost, as a percentage of inventory value is 80 percent. The purchase price to FBSD is $0.50 per gallon. FBSD’s management currently orders the EOQ each time an order is placed. No safety stock is carried. The supplier is now offering a quantity discount of $0.03 per gallon if FBSD orders 10,000 gallons at a...
Rosehut Olive Oil Company makes two grades of olive oil: standard and extra virgin. Rosehut has...
Rosehut Olive Oil Company makes two grades of olive oil: standard and extra virgin. Rosehut has identified two activity cost pools, the related costs per pool, the cost driver for each pool, and the expected usage for each pool. Activity Total Activity Cost Cost Driver Standard Extra Virgin Washing, Pressing & Filtering (WPF) $ 1,673,150 Washing, Pressing, and Filtering hours 46,400 hours 107,100 hours Bottling $ 706,500 Number of bottles 314,000 bottles 78,500 bottles Additional information about each grade of...
Please write clear.. Having samples such as extra virgin olive oil, corn oil and coconut oil....
Please write clear.. Having samples such as extra virgin olive oil, corn oil and coconut oil. A-did the detergent bevave differently than the natural samples when treated with CaCl2? B-would you expect a detergent such as sodium dodecylbenzenesulfonate to react with hard water cations some manner as an ordinary soap molecule? Explain clearly. C- does the contrast in solubilitties between soaps and detergents reflect a difference in the chemical or physical properties of these substances? D- Describe how the structural...
Chelsea Manufacturing, Inc., operates a plant that produces its own regionally-marketed Super Salad Dressing. The dressing...
Chelsea Manufacturing, Inc., operates a plant that produces its own regionally-marketed Super Salad Dressing. The dressing is produced in two processes, blending and bottling. In the Blending Department, all materials are added at the beginning of the process, and labor and overhead are incurred evenly throughout the process. Chelsea uses the weighted average method. The Work in Process—Blending Department account for January 2019 follows: Work in Process-Blending Department January 1 inventory (4,000 gallons, 75% finished) Direct material $31,200 Conversion costs...
In its first year of business, Ollie’s Olive Oil produced 104,000 quarts of olive oil. During...
In its first year of business, Ollie’s Olive Oil produced 104,000 quarts of olive oil. During its first year, the company sold 100,000 quarts of olive oil. Costs incurred during the year were as follows: Ingredients used $228,800 Direct labor 104,000 Variable overhead 197,600 Fixed overhead 98,800 Variable selling expenses 50,000 Fixed selling and administrative expenses 20,000 Total actual costs $699,200 a. 1. What was the actual production cost per quart under variable costing? 2. What was the actual production...
On December 1, Y1, Alexander Inc., a US based importer of olive oil placed an order for 500 cases of olive oil at a price of 100 Euros per case. The pertinent exchange rates are given below.
ALEXANDER Inc. CASE:On December 1, Y1, Alexander Inc., a US based importer of olive oil placed an order for 500 cases of olive oil at a price of 100 Euros per case. The pertinent exchange rates are given below.DATE              SPOT              FORWAR RATE                         CALL OPTION PREMIUM FOR                        RATE           (to January 31, Y2)                        1/31/Y2 (Strike price of $1)12/1/Y1           $1.00                       $1.08                                                       $0.0412/31/Y2         $1.12                       $1.20                                                       $0.121/31/Y2           $1.15                       $1.15                                                       $0.15Alexander Inc. has effective borrowing rate of 12% (1%...
You are to receive an end-of-year bonus of $50,000 increasing by $1000 for each of the...
You are to receive an end-of-year bonus of $50,000 increasing by $1000 for each of the next ten years. If MARR is 12% and inflation rate is anticipated to be 2%, what will be purchasing power?
A machine costs $900,000 and requires $50,000 maintenance for each year of its three-year life. the...
A machine costs $900,000 and requires $50,000 maintenance for each year of its three-year life. the maintenance costs are paid at the end of each year. after 3 years, the machine will be replaced. assume a tax rate of 34% and a discount rate of 14%. if the machine is depreciated over three years using the straight-line method, with no salvage value, what is the equivalent annual annuity?
Cheeseburger and Taco Company purchases 17,886 boxes of cheese each year.
Cheeseburger and Taco Company purchases 17,886 boxes of cheese each year. It costs $20 to place and ship each order and $6.76 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders.
1. Whatcom Co. is evaluating a project which will generate sales of $50,000 each year with...
1. Whatcom Co. is evaluating a project which will generate sales of $50,000 each year with a production cost of $30,000. The project will cost $100,000 and be depreciated straight line to a zero book value over the 10 year life of the project. The applicable tax rate is 36 percent. What is the first year's operating cash flow for this project? 2. Whidbey Inc. purchased some fixed assets three years ago at a cost of $20,000 and these assets...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT