Purchase Solution

Economic Order Quantity and Terms of Sale

Not what you're looking for?

Ask Custom Question

Chapter 20, Problem 10, Page 558
Economic Order Quantity. Genuine Gems orders a full month's worth of precious stones at the beginning of every month. Over the course of the month, it sells off its stock, at which point it restocks inventory for the following month. It sells 200 gems per month, and the monthly carrying cost is $1 per gem. The fixed order cost is $20 per order. Should the firm adjust its inventory policy? If so, should it order smaller stocks more frequently or larger stocks less frequently?

Chapter 21, Problem 8, Page 580
Terms of Sale. Microbiotics currently sells all of its frozen dinners cash on delivery but believes it can increase sales by offering supermarkets 1 month of free credit. The price per carton is $50 and the cost per carton is $40.

a. If unit sales will increase from 1,000 cartons to 1,060 per month, should the firm offer the credit? The interest rate is 1 percent per month, and all customers will pay their bills.

b. What if the interest rate is 1.5 percent per month?

c. What if the interest rate is 1.5 percent per month, but the firm can offer the credit only as a special deal to new customers, while old customers will continue to pay cash on delivery?

Attachments
Purchase this Solution
Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

View More Free Quizzes
Related BrainMass Solutions

  • Cash conversion cycle, NPV for credit, Economic order quantity

    If the investment in the sale is $12,000 and the opportunity cost of funds is 15% per year, what is the NPV of granting credit? A 7. (Economic order quantity) Knoxville Accountants LLP consumes 100,000 packets of plain copier paper annually.

  • Inventories

    For this a company would use various inventory management techniques such as Economic Order Quantity (EOQ) and the ABC method of controlling inventory.

  • Economic Order Quantity: Minimizing Ordering and Inventory Costs

    You need to provide a recommendation of the optimal order quantity of raw materials to your plant manager. Your objective is to determine the economic order quantity (EOQ).

  • Financial Problem: Determining the Firm's Economic Order Quantity

    (Q*= Sq root of 2(S)(D)/C)Also: (C = Inventory carrying cost X cost of frames) Economic Order Quantity Formula: EOQ = Square Root(2S*D/C) Where: S = Sale = 1400 units D = Ordering Cost = 90 C = Carrying Cost = 12%*cost of frames= 12%*54.30

  • Find Economic Order Quantity

    102026 Find Economic Order Quantity If a company sells 2000 units a year, what is the EOQ in terms of dollars and units if order costs are $60/order and $1 per year per unit for storage?

  • Readily Attainable EOQ Assumptions

    EOQ Economic order quantity is the ordering level of the quantity at which the cost per unit is minimum.

  • Average inventory

    310 units 300 units 150 units 155 units None of the above Average inventory= This will be calculated by EOQ formulae EOQ is Economic Order quantity.

  • Inventory Management - Ordering and Inventory

    a. annual usage of units $125,000 b.ordering costs if $100 per order c. carrying cost of 20% of the cost of inventory d. cost of one unit $110 1. what is the economic ordering quantity? 2. how many orders will be placed during the year?

  • Working Capital Management

    On average, the cinder blocks cost $14,and the annual cost of carrying one in inventory is $1.44. The cost of placing an order is$45. Use the economic order quantity model to determine annual, total inventory cost.

View More Related Solutions