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Eric Clothing Limited’s annual demand for materials X is 50 000 units, and the ordering cost is  P10 000 per order and each unit costs P3 000. The estimated cost of holding unit of stock is 15%  of the purchase cost. Required: a. Calculate the economic order quantity (EOQ) and;  b. Calculate the total annual costs of material X.

Eric Clothing Limited’s annual demand for materials X is 50 000 units, and the ordering cost is  P10 000 per order and each unit costs P3 000. The estimated cost of holding unit of stock is 15%  of the purchase cost. Required: a. Calculate the economic order quantity (EOQ) and;  b. Calculate the total annual costs of material X.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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QUESTION 6 
Eric Clothing Limited’s annual demand for materials X is 50 000 units, and the ordering cost is 
P10 000 per order and each unit costs P3 000. The estimated cost of holding unit of stock is 15% 
of the purchase cost.
Required:
a. Calculate the economic order quantity (EOQ) and; 
b. Calculate the total annual costs of material X. 

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