Flanders Bar and Grill Orders Cleaning Supply Kits Using the EOQ

question 27

Multiple Choice

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price is governed by a quantity discount structure. If the restaurant orders 100 or more units, the price per kit is $11. Below 100 units, the price is $12 per kit. What is the optimal order quantity?

• A) 76.4
• B) 100
• C) 68.7
• D) Cannot be determined from the information given

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Definitions:

Process Cost Summary

A report detailing the total cost and production information in a process costing system, used to calculate cost per equivalent unit.

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for "First In, First Out."

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, expressing the amount of work done in terms of fully completed units.

Work in Process Inventory

Stocks of unfinished goods in the production process at a specific point in time. These goods will be transformed into finished goods ready for sale.