What is the elasticity of eoq with respect to sales

Assignment Help Finance Basics

Reference no: EM131489136

Question: (Comprehensive EOQ calculations) Knutson Products Inc. is involved in the production of airplane parts and has the following inventory, carrying, and storage costs:

1. Orders must be placed in round lots of 100 units.

2. Annual unit usage is 250,000. (Assume a 50-week year in your calculations.)

3. The carrying cost is 10 percent of the purchase price.

4. The purchase price is $10 per unit.

5. The ordering cost is $100 per order.

6. The desired safety stock is 5,000 units. (This does not include delivery-time stock.)

7. The delivery time is 1 week. Given the forgoing information: a. Determine the optimal EOQ level.

b. How many orders will be placed annually?

c. What is the inventory order point? (That is, at what level of inventory should a new order be placed?) d. What is the average inventory level?

e. What would happen to the EOQ if annual unit sales doubled (all other unit costs and safety stocks remaining constant)? What is the elasticity of EOQ with respect to sales? (That is, what is the percentage change in EOQ divided by the percentage change in sales?)

f. If carrying costs double, what will happen to the EOQ level? (Assume the original sales level of 250,000 units.) What is the elasticity of EOQ with respect to carrying costs?

g. If the ordering costs double, what will happen to the level of EOQ? (Again assume original levels of sales and carrying costs.) What is the elasticity of EOQ with respect to ordering costs?

h. If the selling price doubles, what will happen to EOQ? What is the elasticity of EOQ with respect to selling price?

Reference no: EM131489136

Questions Cloud

Discuss the expected return : SML problem the United Ind. stock has a beta a 1.26 and an expected return of 11.2. Risk free rate is .04 . What is expected return. I keep getting 14.10.

Management action and stock value : Determine the impact on share price for each of the following proposed actions.

What is the expected annual cost of the complete system : New Wave Surfing Stuff Inc. is a manufacturer of surfboards and related gear that sells to exclusive surf shops located in several Atlantic and Pacific.

Mack uses a perpetual inventory system : Mack uses a perpetual inventory system. What journal entries should Mack prepare on December 3 to record the sale of the merchandise?

What is the elasticity of eoq with respect to sales : (Comprehensive EOQ calculations) Knutson Products Inc. is involved in the production of airplane parts and has the following inventory, carrying, and storage.

Develop a stakeholder analysis for the policy : Develop a Stakeholder Analysis for the policy that you assessed in Assignment 1 from a "prospective position." Begin by stating an appropriate claim.

Airlines capital structure-its relationship to risk-return : What is Delta Airlines (DAL is the stock name) capital structure and its relationship to risk and return?

Determine the eoq : (EOQ calculations) A downtown bookstore is trying to determine the optimal order quantity for a popular novel just printed in paperback.

Affect interest rates on debt securities are risk-inflation : The two primary factors that affect interest rates on debt securities are risk and inflation. Explain the role of each factor.

User Account

All Pages