The Milling Corp A)What Is the Economic Order Quantity?
B)What Is the Distributor

question 66

Essay

The Milling Corp.has developed a new type of widget.The local distributor expects to increase his sales by 20% over the past year due to this new development.Last year's sales were $50,000 at a selling price of $100 per unit.The manager would like to cut costs as much as possible and comes to you for advice.
Relevant cost information includes:
$$\begin{array} { l l } \text { Warehouse space } & \$ 2.50 / \text { unit } \\\text { Material handling expense } & \$ 1.50 / \text { unit } \\\text { Insurance premium } & \$ 1.00 / \text { unit } \\\text { Total ordering cost } & \$ 100.00 / \text { per order }\end{array}$$
A)What is the economic order quantity?
B)What is the amount of average inventory?
C)How many orders will be made per year? D)What is the total cost of this inventory decision?

• A)What is the economic order quantity?
• B)What is the amount of average inventory?
• C)How many orders will be made per year? D)What is the total cost of this inventory decision?

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Definitions:

Indirect Method

A method used in cash flow statements to adjust net income for non-cash transactions and changes in working capital to determine the net cash flow from operating activities.

Statement of Cash Flows

A financial statement that provides an aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Operating Activities

Transactions and events that impact the net income of a business, primarily related to its core operations.

Indirect Method

A way of reporting cash flows from operating activities in the cash flow statement, starting with net income and adjusting for non-cash transactions.