A Company Is Trying to Implement MRP but Is Having

question 45

Essay

A company is trying to implement MRP but is having trouble determining which order sizing method will minimize costs. Setup cost is $200 and holding cost is $2/period. If each period is 1 week, gross requirements are 270 units per 10 weeks, and there are 6 planned order releases for every 10 weeks, calculate the cost for lot-for-lot compared to EOQ for an entire year. Assume that EOQ and lot-for-lot are computed as though the usage will occur continually throughout the year.

---

Definitions:

Goodwill

An intangible asset that represents the excess value of a company over its net asset value, often arising from factors such as reputation, brand, or customer loyalty.

Intangible Assets

Assets that do not have physical substance but are identifiable non-monetary assets without physical substance, used in the production or supply of goods or services, for rental to others, or for administrative purposes.

Identifiability

The capability to recognize, define, or distinguish assets and liabilities within a transaction or set of financial data.

AASB 138

A guideline issued by the Australian Accounting Standards Board that mandates how entities should account for and report on intangible assets.