Picture Company Has One Particular Product That Has an Annual

question 126

Essay

Picture Company has one particular product that has an annual demand of 5,000 units. Total manufacturing costs per unit total $50. Ordering costs for the product total $60 per purchase order. Currently, the carrying costs per unit are 25% of manufacturing costs.
Required:
Determine the economic manufacturing order quantity.

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Definitions:

Direct Materials

Raw materials that can be directly linked to the production of specific goods or services in a manufacturing process.

Fluid Ounces

A unit of volume used primarily in the United States to measure liquids, equivalent to approximately 29.57 ml.

Production Process

The series of steps involved in transforming raw materials into finished goods or services.

Overhead Account

An account used to record the indirect costs of a business, which are not directly attributable to a specific product or service.