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the following inventory data have been established for the stamps company:
1) orders must be placed in multiples of 400 units
2) annual sales are 720,000 units
3) the purchase price per unit from suppliers is $14
4) carrying cost is 30 percent of the purchase price of goods
5) fixed order cost is $90
6) three days are required for delivery
A)what is the EOQ?
B) How many orders should stamp’s place each year?
C) at what inventory level should an order be made?
D) calculate the total cost of ordering and carrying inventories of the order quantity is (i) the EOQ amount (given the 400 units per order restriction), (ii) 4,000 units, or (iii)6,400 units.
Ramsey Tires sells on credit term of net 45 days, whereas the rest of the industry, whereas the rest of the industry sells on terms of net 30 days. on annual credit sales of $6 million, Ramsey currently averages 52 day’s sales in accounts receivable. The company’s CFO estimates that tightening the credit terms to net 30 days would reduce annual sales to $5.8 million, but accounts receivable would drop to 35 days of sales, and the savings on investment in them should more than overcome any loss in profit. Ramsey’s variable cost ratio is 80. If the interest rate on funds invested in receivables is 8 percent, should the change in credit terms be made? All operating costs are paid when inventory is sold. Bad debts and collection costs will not change.
although Faust Corporation has customers dispersed throughout the United States, the company has maintained its headquarters and central billing system in Atlanta. Management is considering an alternative collection procedure to reduce its float. On average, it takes five days from the tome customers mail payments until Faust is able to receive, process, and deposit them. Faust would like to set up a lockbox collection system, which it estimates would reduce the time lag from customer mailing to deposit by four fays-bringing it down to on day. Faust receive an average of $2,520,000 in payments per day. If Faust’s opportunity cost is 10 percent, how much is the lockbox system worth on a monthly basis
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