Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 20, Problem 20.23E
EOQ for a retailer. The Fabric World sells fabrics to a wide range of Industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information:
| Annual demand for denim cloth | 40,700 yards |
| Ordering cost per purchase order | $185 |
| Carrying cost per year | 10% of purchase costs |
| Safety-stock requirements | None |
| Cost of denim cloth | $11 per yard |
The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week).
- 1. Calculate the EOQ for denim cloth.
Required
- 2. Calculate the number of orders that will be placed each year.
- 3. Calculate the reorder point for denim cloth.
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EOQ for a retailer. The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information:
The Every Day Fabric sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming
inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Every Day Fabric has collected the following information:
(Click the icon to view the information.)
Read the requirements.
Requirement 1. Calculate the EOQ for denim cloth.
Begin by selecting the formula used to calculate EOQ. (D = Demand in units for one year, P = Ordering cost per purchase order, C = Carrying cost of one unit in stock, Q = Any order quantity.)
%3D
%3D
%3D
(Round the denominator to the nearest cent.)
Data Table
The EOQ for denim cloth is
| yards.
Requirement 2. Calculate the number of orders that will be placed each year.
Annual demand for denim cloth
20,000 yards…
Data Table
Annual demand for denim cloth
40,700 yards
Ordering cost per purchase order
$185
Carrying cost per year
10% of purchase costs
Safety-stock requirements
None
Cost of denim cloth
$11 per yard
The purchasing lead time is 2 weeks. The Fabric World is open 220
days a year (44 weeks for 5 days a week).
Print
Done
Chapter 20 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 20 - Why do better decisions regarding the purchasing...Ch. 20 - Name six cost categories that are important in...Ch. 20 - What assumptions are made when using the simplest...Ch. 20 - Give examples of costs included in annual carrying...Ch. 20 - Give three examples of opportunity costs that...Ch. 20 - What are the steps in computing the cost of a...Ch. 20 - Why might goal-congruence issues arise when...Ch. 20 - JIT purchasing has many benefits but also some...Ch. 20 - What are three factors causing reductions in the...Ch. 20 - You should always choose the supplier who offers...
Ch. 20 - Prob. 20.11QCh. 20 - What are the main features of JIT production, and...Ch. 20 - Distinguish inventory-costing systems using...Ch. 20 - Describe three different versions of backflush...Ch. 20 - Discuss the differences between lean accounting...Ch. 20 - The order size associated with the...Ch. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Lyle Co. has only one product line. For that line,...Ch. 20 - Just-in-time inventory assumes all of the...Ch. 20 - Economic order quantity for retailer. Wonder Line...Ch. 20 - Economic order quantity, effect of parameter...Ch. 20 - EOQ for a retailer. The Fabric World sells fabrics...Ch. 20 - EOQ for manufacturer. Sk8 Company produces...Ch. 20 - Sensitivity of EOQ to changes in relevant ordering...Ch. 20 - JIT production, relevant benefits, relevant costs....Ch. 20 - Backflush costing and JIT production. Grand...Ch. 20 - Backflush costing, two trigger points, materials...Ch. 20 - Backflush costing, two trigger points, completion...Ch. 20 - Prob. 20.30PCh. 20 - Prob. 20.31PCh. 20 - Prob. 20.32PCh. 20 - Prob. 20.33PCh. 20 - JIT purchasing, relevant benefits, relevant costs....Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Backflush costing and JIT production. The Acton...Ch. 20 - Backflush, two trigger points, materials purchase...Ch. 20 - Backflush, two trigger points, completion of...Ch. 20 - Lean accounting. Reliable Security Devices (RSD)...Ch. 20 - JIT production, relevant benefits, relevant costs,...
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