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 total variable cost of 6, A company has developed a new produ...

A company has developed a new product which it will launch next month. During the initial production phase the company expects to produce 6,400 units in batches of 100 units. The f

Depreciate assets, Are non-profit and governments required to depreciate as...

Are non-profit and governments required to depreciate assets? Why or why not? Would it make sense for them to use double declining balance? Is there a difference between a non-p

Estimate the required rate of return, a)     Company X is expected to maint...

a)     Company X is expected to maintain a constant 7% growth rate in their dividends, indefinitely. If the company has a dividend yield of 4%, what is the required return on their

Wages and salaries, Given the information that follows, prepare a cash budg...

Given the information that follows, prepare a cash budget for the XYZ Store for the first six months of 2010. All prices and costs remain constant. Sales are 90% for cre

Marginal and absorption costing, on june 2005 20 units of the product in st...

on june 2005 20 units of the product in stock the following is extracted from the companys books direct material-200 per unit,direct labour 150 per unit, variable production overhe

What was the market rate of interest, Q. Given the below, partial bond accr...

Q. Given the below, partial bond accretion table, what was the market rate of interest when the bond was issued?     Cash     Interest

Determine the relevant costs, Cowboy Constructions employs a full-time driv...

Cowboy Constructions employs a full-time driver and incurs costs for a vehicle to deliver paperwork between each of their building sites. Select Couriers has offered to carry out t

Marginal cost curves, A firm operates two plants with the marginal cost cur...

A firm operates two plants with the marginal cost curves given by MC 1 = 50 + 2Q 1 , MC 2 = 90 + Q 2 . If the firm's total output must be 80 units, how much will it produce a

Determine the overhead allocation rate, Vintage Auto Company manufactures p...

Vintage Auto Company manufactures parts to order for antique cars. Vintage Auto makes everything from fenders to engine blocks. Each customer order is treated as a job. Vintage Aut

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