Example of economic order quantity, Cost Accounting

Assignment Help:

Example of Economic Order Quantity

The EOQ model supposes:

- Annual demand is recognized

- Hold costs are constant and recognized

- Ordering costs are recognized and constant

- The same quantity is ordered every instance an order is made as demand as assumed not to fluctuate considerably.

Example

ABC Ltd has an aggregate demand of 1.2 Million units. All time they put an order there is an ordering cost of shs 1,000, holding cost is shs 100 per unit. Find out:

i. EOQ

ii. No. of order to be made based EOQ

iii. Net cost of stocks based on the EOQ

Solution

EOQ = √(aDCo/Ch)

= (2 x 1200000 x 1000)/100

= 489 units

i) No of order = 1200000/4899

= 244.9

≈ 245 Orders

ii) Net cost = DCo/Q + (½ QCh)

                  = 1200000 (1000) /4899 + ½ (4899)100 = 489,900


Related Discussions:- Example of economic order quantity

Prepare of the final accounts of a business, You are assisting the accounta...

You are assisting the accountant on the preparation of the final accounts of a business with a year-end of 31 December. A trial balance has been drawn up and a suspense account ope

#manual productions, Vary the force by hiring layoffs. No over time.

Vary the force by hiring layoffs. No over time.

Estimate the debt and assets ratio, 1. Wrangle Corporation stock sells at a...

1. Wrangle Corporation stock sells at a price of $80 a share and the riskless rate is 7%. Calculate the price of a 9-month call option on Wrangle stock with an exercise price of $7

Process accounts, What is the easiest of calculate equivalents before produ...

What is the easiest of calculate equivalents before producing a process account 2

What is the net operating income, A manufacturing company that produces a s...

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: selling price $140 units in begining in

Prepare an income statement for the current year, The assets and liabilitie...

The assets and liabilities of Amos Moving Services at May 31, 2011, the end of the current year, and its revenue and expenses for the year are listed below.  On April 1, 2010, the

Overhead variance, The following information is for the third quarter of th...

The following information is for the third quarter of this year: Planned Actual Production 92,000 units 87,000 units Direct labor hours 506,800 DL hrs 380,000 DL hrs Fixed manuf

Determine expected net income and net cash flow, Elite Company is planning ...

Elite Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $300,000 cost with an expected four-year life a

The actual price per pound of the direct material purchsed ?, A co has a st...

A co has a standard costing system. the following are avaiable for september: actual quantity of direct materials purchased and used: 20,000 pounds Standard price of direct mater

Features and procedures of job costing, Features and Procedures of Job cost...

Features and Procedures of Job costing Features of Job costing Product is against the customer's order and not on job stocks. Every job has its own characteristics and ne

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