Question :
29) Discuss considerations that should be fully taken into account : 1217098
29) Discuss considerations that should be fully taken into account when developing inventory related relevant costs for use in an economic order quantity (EOQ) model.
Objective 20.3
1) Video Images is a distributor of DVDs. Quick-Disk Mart is a local retail outlet which sells blank and recorded DVDs. Quick-Disk Mart purchases tapes from Video Images at $3.00 per DVD. DVDs are shipped in packages of 20. Video Images pays all incoming freight, and Quick-Disk Mart does not inspect the DVDs due to Video Images reputation for high quality. Annual demand is 104,000 DVDs at a rate of 4,000 DVDs per week. Quick-Disk Mart earns 20% on its cash investments. The purchase-order lead time is two weeks. The following cost data are available:
Relevant ordering costs per purchase order$90.50
Carrying costs per package per year:
Relevant insurance, materials handling,
breakage, etc., per year$ 4.50
What is the required annual return on investment per package?
A) $60.00
B) $2.50
C) $12.00
D) $0.60
Answer the following questions using the information below:
Digital Goods is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases tapes from Digital Goods at $10.00 per DVD; DVDs are shipped in packages of 25. Digital Goods pays all incoming freight, and DVD Mart does not inspect the DVDs due to Digital Goods’ reputation for high quality. Annual demand is 208,000 DVDs at a rate of 4,000 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available:
Relevant ordering costs per purchase order$94.50
Carrying costs per package per year:
Relevant insurance, materials handling,
breakage, etc., per year$ 3.50
2) What is the economic order quantity?
A) 384 packages
B) 475 packages
C) 146 packages
D) 196 packages
3) What are the relevant total costs?
A) $5,697
B) $2,829
C) $8,029
D) $2,868
4) How many deliveries will be made during each time period?
A) 86.7 deliveries
B) 72.0 deliveries
C) 138.0 deliveries
D) 42.1 deliveries
Answer the following questions using the information below:
Short Grass Incorporated is a distributor of golf balls. Martin’s Golf Supplies is a local retail outlet which sells golf balls. Martin’s purchases the golf balls from Short Grass Incorporated at $0.75 per ball; the golf balls are shipped in cartons of 72. Short Grass Incorporated pays all incoming freight, and Martin’s Golf Supplies does not inspect the balls due to Short Grass’ reputation for high quality. Annual demand is 155,520 golf balls at a rate of 2,991 balls per week. Martin’s Golf Supplies earns 12% on its cash investments. The purchase-order lead time is one week. The following cost data are available:
Relevant ordering costs per purchase order$125.00
Carrying costs per carton per year:
Relevant insurance, materials handling,
breakage, etc., per year$ 0.77
5) If Martin’s makes an order (1/12 of annual demand) once per month, what are the relevant total costs?
A) $1,500
B) $652.50
C) $2,152.50
D) $3,000.00
6) What is the economic order quantity?
A) 180 cartons
B) 273 cartons
C) 270 cartons
D) 360 cartons
7) Purchasing at the EOQ recommended level, how many deliveries will be made during each time period?
A) 2 deliveries
B) 6.0 deliveries
C) 7.91 deliveries
D) 12 deliveries
