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The mechanical engineer at Robinson Manufacturing has developed a new gearbox. The local distributor expects to increase his sales by 30% over the past year due to this new development. Last year's sales were $70,000 at a selling price of $100 per unit. The manager would like to cut costs as much as possible and comes to you for advice.
Relevant cost information includes:
Warehouse space $3.00/unitMaterial handling expense $2.00/unitInsurance premium $1.00/unitTotal ordering cost $150.00/per order Problem 1: What is the economic order quantity?
Problem 2: What is the amount of average inventory?
Problem 3: How many orders will be made per year? Round to 2 decimal places.
Problem 4: What is the total cost of this inventory decision?
Problem 5: What would be the advantage and disadvantage if the company decided to carry safety stock? Explain your answer in sentence form. Calculations are not required.
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T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .
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