Question

6. Expected annual usage of a particular raw material is 1,200,000 units, and standard order size is 10,000 units. The invoice cost of each unit is $145, and the cost to place one purchase order is $105. The estimated annual order cost is: a. $12,000 b. $17,400 c. $12,600 d. $800,000 7. Assuming that demand is determinable, what is the objective of the economic order quantity model for inventory? a. To minimize order costs or carrying costs, whichever are higher b. To minimize order costs or carrying costs and maximize the rate of inventory turnover c. To minimize the total order costs and carrying costs over a period of time d. To order sufficient quantity to economically meet the next period's demand 8. Rowe Co.'s Job 401 for the manufacture of 2.200 coats was completed during August at the unit costs presented below. Final inspection of Job 401 disclosed 200 spoiled coats that were sold to a jobber for $6.000. Direct Materials $24 Direct Labor 18 Factory Overhead 14 Total Cost $56 Assume that spoilage is attributable to the exacting specifications of Job 401 and is charged to this specific job. What would be the unit cost of the good coats produced on Job 401? a. $56.00 b. $58.60 c. $53.00 d. $48.18

Answer 1

6) Answer C $12,600

annual order cost = no. of orders * per order cost

= (1200000/10000)*105

=120*105

=$12,600

7) Answer C

The main objective of economic order quantity is to minimize the ordering cost and carrying cost.

since this cannot be achieved at a once it will be done on the period of time.

So, EOQ main objective to lower the ordering costs and carrying cost.

8) Answer B $58.60

unit cost of good=((2200*56)-6000) /2000

=(117,200/2000)

=$58. 60