Economic order quantity, Cost Accounting

Assignment Help:

KIW Ltd currently orders Material B in batches of 2,500 kgs. Material B is consumed at a steady, known rate over the company's planning horizon of one year. The current usage is 40,000 kgs per annum. The costs of ordering Material B have been calculated at $300 per order. Each order is received and checked by an employee engaged in using B in production who generates a contribution of $90 per hour when not involved in materials checks. The stock check takes five hours. Holding costs amount to $15 per unit per annum.

The supplier of material B has very recently offered KIW a quantity discount of $0.24 per kg on the current price of $24, for all orders of 4,000 or more kgs of  Material B.

Required

(a)   Calculate the annual cost of the current ordering policy.                                      

(b)  Calculate the optimal order quantity of material B, ignoring the quantity discount;

(c)   Evaluate whether KIW should continue with the current ordering policy, order the economic order quantity or take advantage of the discount by ordering in batches of 4,000 kgs.                                                                                                                        

(d)  Critically discuss the limitations of the Economic Order Quantity model as a way of managing stock.                                                                                                    

e)   Specify the circumstances in which, a firm, although being able to determine the Economic Order Quantity, might choose a different re-order quantity.


Related Discussions:- Economic order quantity

Calculate the payback and discounted payback period, Lapsol limited manufac...

Lapsol limited manufacture electrical appliances for the export market. The management of the company are considering investing in one of two possible capital expenditure projects.

Comparison between marginal and absorption costing, Comparison between Marg...

Comparison between Marginal Costing and Absorption Costing There are accountants who favour all costing method. Arguments in favour about absorption costing are specified a

Determine the cost that changes in total proportionately, Presented below i...

Presented below is a list of terms relating to cost behavior, followed by definitions of those terms: a. Rent on a factory building b. Engineering approach c. Fixed cost

Cvp analysis in situations subject to change, CVP Analysis in Situations Su...

CVP Analysis in Situations Subject To Change Revenue and Cost will change and also sales volume because of a number of factors involving: a) Increased competition may need

Profit or loss on the disposal of the fixtures and fittings, This task invo...

This task involves the recording of non-current asset information in the general (nominal, main) ledger and other non-current asset matters. You are assisting in preparing the a

Job Order Costing, Bedovin Company manufactures office tables and chairs us...

Bedovin Company manufactures office tables and chairs using the job order cost system

CORPORATE ACCOUNTING, I WENT TO MAKE ONE ASSIGNMENT CAN YOU GIVE ME QUOTE O...

I WENT TO MAKE ONE ASSIGNMENT CAN YOU GIVE ME QUOTE OR LINK TO SHARE ASSIGNMENT DETAIL

Calculate the direct labor, A CPA firm estimates that an audit will require...

A CPA firm estimates that an audit will require the following work: Type of Auditor Expected Hours Cost per Hour Standard Costs Manager 10 $50 $ 500 Senior 20 40 800 Staff 40 30

Closing stock, The value of un-sold stock. The stock is valued at cost or m...

The value of un-sold stock. The stock is valued at cost or market price either is lower. Usually, the closing stock is not specified in the trial balance but is specified in adjust

Determine the minimum (floor) price, Special order pricing - Shorewood Shoe...

Special order pricing - Shorewood Shoes Company makes and sells a variety of leather shoes for children. For its current mix of different models and seizes, the average selling pri

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd