Question
In: Accounting
The annual sales of product Y of Govender Limited is 400 000 units. The purchase price...
The annual sales of product Y of Govender Limited is 400 000 units. The purchase price is R12 per unit. The carrying cost of product Y amounts to 30% of the unit purchase price. The ordering cost is R45 per order.
Required:
Use the information provided above by Govender Limited to calculate the:
2.1 Economic order quantity (EOQ).
2.2 Number of orders that need to be placed each year.
Jumbo Enterprises plans to borrow R1 000 000 for one year. The stated interest rate is 15% per annum.
Solutions
Expert Solution
Answer:- 2.1)- Economic Order Quantity = 10000 units
Explanation:-
Economic order quantity= √2*A*Cp/Ch
= √2*400000 units*$45 /($12 per unit*30%)
= 10000 units
Where:-
A = Annual demand
Cp= Cost to place a single order
Ch= Cost to hold one unit inventory for a year (ie- carrying cost)
2.2)- Number of orders that need to be placed each year= 40 orders.
Explanation-Number of orders per year = Annual demand/ Optimal order quantity(EOQ)
=400000 units/10000 units
= 40 orders
ekkarill92 answered 2 years agoRelated Solutions
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