EOQ for a retailer. The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information: 40,700 yardsAnnual demand for denim clothOrdering cost per purchase orderCarrying cost per yearSafety-stock requirementsCost of denim cloth$18510% of purchase costsNone$11 per yardThe purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days aweek).1. Calculate the E0Q for denim cloth.2. Calculate the number of orders that will be placed each year.Required3. Calculate the reorder point for denim cloth.

Answered: 40,700 yards Annual demand for denim…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter2: Accounting For Materials

Section: Chapter Questions

Problem 1E: Order Point Pershing, Inc. expects daily usage of 500 lb of material X, an anticipated lead time of...

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EOQ for a retailer. The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information:

40,700 yards
Annual demand for denim cloth
Ordering cost per purchase order
Carrying cost per year
Safety-stock requirements
Cost of denim cloth
$185
10% of purchase costs
None
$11 per yard
The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a
week).
1. Calculate the E0Q for denim cloth.
2. Calculate the number of orders that will be placed each year.
Required
3. Calculate the reorder point for denim cloth.

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