A Company That Makes Construction Equipment Is Exploring Different Lot

question 14

Essay

A company that makes construction equipment is exploring different lot sizing approaches to its MRP schedule: lot-for-lot (LFL), fixed order quantity (FOQ) using the EOQ, and period order quantity (POQ).It costs $100 to set up the production line to produce hydraulic jacks and the carrying cost per unit per week is $1.Annual demand is expected to be 1550 jacks.For planning purposes, the company uses a 50-week work year and disregards the effects of initial inventory and safety stock.The net requirements for hydraulic jacks for the next six weeks are:
a.Using a LFL approach, what is the lot size in week 3?
b.What is the total cost for the LFL method?
c.What is the Fixed order quantity (FOQ) using the EOQ approach?
d.What is the beginning inventory for week 5 using the FOQ approach?
e.What is the total cost using the FOQ method?
f.What is the period order quantity?
g.What is the ending inventory for week 4 using the POQ method?
h.What is the total cost using the POQ approach?

---

Definitions:

First-In, First-Out Method

An inventory valuation method where the first items placed in inventory are the first ones sold, typically used to manage costs and stock.

Cost Reconciliation Report

A report detailing the reconciliation of budgeted, standard, or estimated costs with actual costs incurred.

Work in Process Inventory

Materials and products that are in the production process but have not yet been completed.

First-In, First-Out Method

An inventory valuation method where the costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold.