Merlita works for a local ceramics company. She just completed her accountancy degree and learned the EOQ model in one of her subjects. She suggested to her employer to adopt it. The company sells 20,000 pieces of specialty ceramic items each year. Traditionally, they have produced these items four times a year, making 5,000 pieces at a time. They carry no safety stock as customers do not mind waiting for orders. The average piece of ceramic items costs P400 to make and costs the company P20 to carry in inventory for a year. The set up costs for each production run total P80. The company should a. Continue the existing system due to P38,950 advantage. b. Adopt EOQ due to savings of P35,675. c. Adopt EOQ due to savings of P42,320. d. Continue the existing system due to P41,820 advantage.
Merlita works for a local ceramics company. She just completed her accountancy degree and learned the EOQ model in one of her subjects. She suggested to her employer to adopt it. The company sells 20,000 pieces of specialty ceramic items each year. Traditionally, they have produced these items four times a year, making 5,000 pieces at a time. They carry no safety stock as customers do not mind waiting for orders. The average piece of ceramic items costs P400 to make and costs the company P20 to carry in inventory for a year. The set up costs for each production run total P80. The company should a. Continue the existing system due to P38,950 advantage. b. Adopt EOQ due to savings of P35,675. c. Adopt EOQ due to savings of P42,320. d. Continue the existing system due to P41,820 advantage.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Merlita works for a local ceramics company. She just completed her accountancy degree and learned the EOQ model in one of her subjects. She suggested to her employer to adopt it. The company sells 20,000 pieces of specialty ceramic items each year. Traditionally, they have produced these items four times a year, making 5,000 pieces at a time. They carry no safety stock as customers do not mind waiting for orders. The average piece of ceramic items costs P400 to make and costs the company P20 to carry in inventory for a year. The set up costs for each production run total P80. The company should
a. Continue the existing system due to P38,950 advantage.
b. Adopt EOQ due to savings of P35,675.
c. Adopt EOQ due to savings of P42,320.
d. Continue the existing system due to P41,820 advantage.
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