For Supply Item ABC, Andrews Company Has Been Ordering 125

question 76

Essay

For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. A new purchasing agent has been hired by the company who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following information:

Required:
Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs.

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Definitions:

Capital

Capital refers to financial assets or their financial value, along with the physical factors of production used to create goods and services.

Income Statement

A report documenting a business's income, costs, and earnings during a certain timeframe.

Revenues And Expenses

Financial terms where revenues are the earnings from normal business operations and expenses are the costs incurred to earn these revenues.

Statement Of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.