Evaluation of eoq - inventory with shortage of stock

Assignment Help Corporate Finance
Reference no: EM13356858

Evaluation of EOQ - Inventory with shortage of stock allowance

The bookstore at Smith College purchases sport shirts with the college logo to sell from a local vendor.   The vendor sells the sport shirts to the college for $38 each.  The cost to the bookstore for placing each order is $120.  The carrying cost is $5.20 per shirt per year.   The bookstore estimates that 1700 sport shirts will be sold over the next year and does not want any shortages.  The bookstore sells the shirt for $50 each.   There are 260 business days a year for the bookstore.   Lead time for filling an order once placed is 2 weeks.   The vendor has offered the College Bookstore the following discounts:

Order Size

Discount

% of Order

Cost of Shirts from Vendor

1-299

0% discount

$38

300-499

2% discount

$37.24

500-799

4% discount

$36.48

800+

6% discount

$35.72

Assuming the local vendor eliminates it's discounts and charges a flat rate of $35 per shirt.  The bookstore is considering allowing backorders if it is profitable to do so.  They determine their shortage cost per shirt to be $7.50.  Should the bookstore allow shortages?  Explain the basis for your answer.

Reference no: EM13356858

Questions Cloud

Finding the value of inventory destroyed in natural : finding the value of inventory destroyed in natural disaster.on july 24 of the current year the acme peach company
Evaluation of eoq decisions of college on vendors orderthe : evaluation of eoq decisions of college on vendors orderthe bookstore at smith college purchases sport shirts with the
Computation of economic order quantity of books for : computation of economic order quantity of books for college.the bookstore at smith college purchases sport shirts with
Evaluation of re-order level of books inventory of : evaluation of re-order level of books inventory of college.the bookstore at smith college purchases sport shirts with
Evaluation of eoq - inventory with shortage of stock : evaluation of eoq - inventory with shortage of stock allowancethe bookstore at smith college purchases sport shirts
Inventory decisions - free or unused capacity of freezer of : inventory decisions - free or unused capacity of freezer of ice cream.the sweet treat shop sells ice cream and frozen
Computation of ice cream to be manufactured using the : computation of ice cream to be manufactured using the linear programming technique.the sweet treat shop sells ice cream
Multiple choice questions on return on equity1nbsp during : multiple choice questions on return on equity.1.nbsp during the latest year ruth corp. had sales of 300000 and a net
Determination of net income under the alternativesmckinsee : determination of net income under the alternatives.mckinsee inc. is developing a plan to finance its asset base. the

Reviews

Write a Review

Corporate Finance Questions & Answers

  Calculate the irr of this joint-venture

Would it be possible to calculate the IRR of this joint-venture? What are the possible problems, if any, with its calculation in this specific problem?

  Disclosures required in various situations

A ten year loan contact which the firm entered into three years ago, provides that dividend pay may not exceed net income received after taxes subsequent to the date of contract.

  Find the average before tax profit of a round trip flight

Michael Bordellet is the owner or pilot of Bordellet Air Service. The corporation flies a daily round trip from Seattle's Lake Union to a resort in Canada.

  Compute the eac for both machines

Dahlia enterprises needs someone to supply it with 120,000 cartons of machine screws per year to support its manufacturing needs over the next 5 years, and you've decided to bid on the contract.

  What is the profitability index of the project

What is the profitability index of the project and the constant-growth rate for dividends must be equal to the required rate of return.

  What change would you expect in the required return

What change would you expect in the required return for each of the stocks and what change would you expect in the required return for each of the stocks?

  What are retained earnings for last year

What are retained earnings for last year and how much debt will be needed for the new project

  Determine the nominal rate of return

A bond actual rate of return is 3.85% for a time period when the inflation rate was 1.97%. Determine the actual nominal rate of return?

  Viability of the proposed project using the npv

Prepare the case, with recommendations, to be presented to the Board of Directors of IFG. You should assess the viability of the proposed project using the NPV, IRR and payback methods.

  Effect on the price if systematic risk increase

AKA's stock is currently selling for $11.44. This year the firm had earnings share of dollar 2.80 and the current dividend is $0.68. Earnings are expected to grow 7 percent a year in the foreseeable future.

  Show the effect of the transactions

Show the effect of the following transactions, relating to WhyMe Ltd, on the accounting equation. Note: Using the headings below as a guide, you need only indicate the amount under the relevant heading, debit or credit.

  Cost for each product using this allocation process

Compute the cost for each product using this allocation process. What would be the impact on profits? How accurate is this method of allocating costs?

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