Economic Order Quantity (EOQ)

QTB – Nov 2014 – L1 – SB – Q3 – Operations Research

Calculate control levels for inventory, expected time for a project, and identify the critical path in a network diagram.

Question

a. Calculate the various control levels from the following data on a given inventory item:

Normal usage: 1,600 per day
Minimum usage: 1,000 per day
Maximum usage: 3,000 per day
Lead time: 16 – 20 days
EOQ: 40,000
(9 Marks)

b. If the optimistic, most likely, and pessimistic times are given as 11 days, 15 days, and 18 days respectively, calculate the expected time of the project delivery.
(3 Marks)

c. The network for a small building project is shown below together with the time in days required to complete each task.

Required:

i. List the possible paths together with their durations through the network. (6 Marks)
ii. State the critical path and the project duration. (2 Marks)

(Total: 20 Marks)

Answer

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Tags: Control Levels, Critical Path, Economic Order Quantity (EOQ), Expected Time, Network Analysis
Level: Level 1

Topic: Operations Research
Series: NOV 2014

MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis

Calculation of the Economic Order Quantity (EOQ) and analysis of the impact of a quantity discount on total inventory costs.

Question

The quarterly demand for an item of raw materials is estimated at 2,000 units at a purchase price of GH¢180 per unit. It is estimated that the cost per order will be GH¢270 and the cost of holding a unit of material in inventory will be GH¢24.

Required:

i) Compute the optimal order quantity, and total minimum costs. (4 marks)

ii) Suppose a supplier offers 5% quantity discount for purchase of 8,000 units, should the offer be accepted? (3 marks)

Answer

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Tags: Discounts, Economic Order Quantity (EOQ), Holding costs, Inventory Costs, Ordering costs
Level: Level 2

Topic: Cost-Volume-Profit (CVP) Analysis
Series: NOV 2018

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

Question

MM Company Ltd., a manufacturer of groundnut paste, wishes to know whether it is advisable to stick to its economic orders or accept a special order from a foreign supplier for the supply of groundnuts. The following information has been provided:

Purchase price per bag of groundnut: GH¢360
Holding cost per annum is 10% of the cost of a bag of groundnut
Ordering cost per annum: GH¢7.7
Annual demand of groundnut paste: 6,000 bags
Normal usage per month: 520 bags
Minimum usage per month: 500 bags
Maximum usage per month: 700 bags

Required:

i) The foreign supplier promises a reduction in the price of a bag of groundnut by 8% if MM Company is willing to order 3,000 units each time it wants to order. Advise MM.
(10 marks)

ii) What is the difference between a bin card and a store ledger card?
(3 marks)

Answer

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Tags: Cost Analysis, Economic Order Quantity (EOQ), Inventory Management, Supplier Decision
Level: Level 2

Topic: Decision making techniques, Relevant Cost and Revenue
Series: MAY 2016

FM – NOV 2016 – L2 – Q5 – Inventory Management

Determines the cost-minimizing order size, calculates the cost of debenture, analyzes the cost of a discount offered to customers, and computes results of a Forward Rate Agreement.

Question

a) The annual demand for Praise Limited’s inventory is 10,500 units. The item costs GH¢400 a unit to purchase. The holding cost for one unit for one year is 12% of the unit cost, and ordering costs are GH¢450 per order. The supplier offers a 2% discount for orders of 700 units or more and a discount of 3% for orders of 950 units or more.

Required:
Determine the cost-minimizing order size of the company. (8 marks)

b) Five years ago, Gasoto Ltd. issued 12 percent irredeemable debentures at their par value of GH¢100. The current market price of these debentures is GH¢94. The company pays corporation tax at a rate of 30 percent.

Required:
Calculate the company’s current cost of debenture. (3 marks)

c) Zeb Limited offers 2 percent discount to its customers who pay within ten (10) days. The company normally collects its debt within thirty (30) days. Assume 365 days in a year.

Required:
Determine the cost of the discount to the company. (3 marks)

d) Brothers Limited enters into a forward rate agreement (FRA) with Bank of Frica in which Brothers Limited will receive a fixed rate of 8% for nine (9) months on a loan of GH¢1 million. Bank of Frica agrees to receive a nine (9) months LIBOR rate to be determined in nine (9) months’ time on the loan principal.

Required:
Determine the results of the FRA and the effective loan rate if the spot rate for the LIBOR in nine (9) months is:
i) 5%
ii) 10% (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost of Debentures, Discount on Receivables, Economic Order Quantity (EOQ), Forward Rate Agreement (FRA), Trade Discounts
Level: Level 2

Topic: Inventory Management
Series: NOV 2016

FM – Nov 2017 – L2 – Q4b – Inventory Management

Calculate the Economic Order Quantity (EOQ), total inventory costs, and the number of orders per year for a manufacturing company.

Question

Asuo Ltd manufactures only one product, planks. The single raw material used in making planks is the dint. For each plank manufactured, twelve dints are required. The company manufactures 150,000 planks per year, and demand for planks is perfectly steady throughout the year. It costs GH¢200 each time dints are ordered, and the carrying costs are GH¢8 per dint per year.

Required:
i) Determine the Economic Order Quantity (EOQ) of dints. (3 marks)
ii) What are the total inventory costs for Asuo (carrying costs plus ordering costs)? (2 marks)
iii) How many times per year would inventory be ordered? (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Economic Order Quantity (EOQ), Inventory Costs, Inventory Management
Level: Level 2

Topic: Inventory Management
Series: NOV 2017

QTB – Nov 2014 – L1 – SB – Q3 – Operations Research

Calculate control levels for inventory, expected time for a project, and identify the critical path in a network diagram.

Question

a. Calculate the various control levels from the following data on a given inventory item:

Normal usage: 1,600 per day
Minimum usage: 1,000 per day
Maximum usage: 3,000 per day
Lead time: 16 – 20 days
EOQ: 40,000
(9 Marks)

b. If the optimistic, most likely, and pessimistic times are given as 11 days, 15 days, and 18 days respectively, calculate the expected time of the project delivery.
(3 Marks)

c. The network for a small building project is shown below together with the time in days required to complete each task.

Required:

i. List the possible paths together with their durations through the network. (6 Marks)
ii. State the critical path and the project duration. (2 Marks)

(Total: 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Control Levels, Critical Path, Economic Order Quantity (EOQ), Expected Time, Network Analysis
Level: Level 1

Topic: Operations Research
Series: NOV 2014

MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis

Calculation of the Economic Order Quantity (EOQ) and analysis of the impact of a quantity discount on total inventory costs.

Question

Required:

i) Compute the optimal order quantity, and total minimum costs. (4 marks)

ii) Suppose a supplier offers 5% quantity discount for purchase of 8,000 units, should the offer be accepted? (3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Discounts, Economic Order Quantity (EOQ), Holding costs, Inventory Costs, Ordering costs
Level: Level 2

Topic: Cost-Volume-Profit (CVP) Analysis
Series: NOV 2018

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

Question

Purchase price per bag of groundnut: GH¢360
Holding cost per annum is 10% of the cost of a bag of groundnut
Ordering cost per annum: GH¢7.7
Annual demand of groundnut paste: 6,000 bags
Normal usage per month: 520 bags
Minimum usage per month: 500 bags
Maximum usage per month: 700 bags

Required:

i) The foreign supplier promises a reduction in the price of a bag of groundnut by 8% if MM Company is willing to order 3,000 units each time it wants to order. Advise MM.
(10 marks)

ii) What is the difference between a bin card and a store ledger card?
(3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Analysis, Economic Order Quantity (EOQ), Inventory Management, Supplier Decision
Level: Level 2

Topic: Decision making techniques, Relevant Cost and Revenue
Series: MAY 2016

FM – NOV 2016 – L2 – Q5 – Inventory Management

Determines the cost-minimizing order size, calculates the cost of debenture, analyzes the cost of a discount offered to customers, and computes results of a Forward Rate Agreement.

Question

Required:
Determine the cost-minimizing order size of the company. (8 marks)

Required:
Calculate the company’s current cost of debenture. (3 marks)

c) Zeb Limited offers 2 percent discount to its customers who pay within ten (10) days. The company normally collects its debt within thirty (30) days. Assume 365 days in a year.

Required:
Determine the cost of the discount to the company. (3 marks)

Required:
Determine the results of the FRA and the effective loan rate if the spot rate for the LIBOR in nine (9) months is:
i) 5%
ii) 10% (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost of Debentures, Discount on Receivables, Economic Order Quantity (EOQ), Forward Rate Agreement (FRA), Trade Discounts
Level: Level 2

Topic: Inventory Management
Series: NOV 2016

FM – Nov 2017 – L2 – Q4b – Inventory Management

Calculate the Economic Order Quantity (EOQ), total inventory costs, and the number of orders per year for a manufacturing company.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Economic Order Quantity (EOQ), Inventory Costs, Inventory Management
Level: Level 2

Topic: Inventory Management
Series: NOV 2017

Question Tag: Economic Order Quantity (EOQ)

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QTB – Nov 2014 – L1 – SB – Q3 – Operations Research

Calculate control levels for inventory, expected time for a project, and identify the critical path in a network diagram.

MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis

Calculation of the Economic Order Quantity (EOQ) and analysis of the impact of a quantity discount on total inventory costs.

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

FM – NOV 2016 – L2 – Q5 – Inventory Management

Determines the cost-minimizing order size, calculates the cost of debenture, analyzes the cost of a discount offered to customers, and computes results of a Forward Rate Agreement.

FM – Nov 2017 – L2 – Q4b – Inventory Management

Calculate the Economic Order Quantity (EOQ), total inventory costs, and the number of orders per year for a manufacturing company.

QTB – Nov 2014 – L1 – SB – Q3 – Operations Research

Calculate control levels for inventory, expected time for a project, and identify the critical path in a network diagram.

MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis

Calculation of the Economic Order Quantity (EOQ) and analysis of the impact of a quantity discount on total inventory costs.

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

FM – NOV 2016 – L2 – Q5 – Inventory Management

Determines the cost-minimizing order size, calculates the cost of debenture, analyzes the cost of a discount offered to customers, and computes results of a Forward Rate Agreement.

FM – Nov 2017 – L2 – Q4b – Inventory Management

Calculate the Economic Order Quantity (EOQ), total inventory costs, and the number of orders per year for a manufacturing company.

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Question Tag: Economic Order Quantity (EOQ)

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QTB – Nov 2014 – L1 – SB – Q3 – Operations Research

Calculate control levels for inventory, expected time for a project, and identify the critical path in a network diagram.

You're reporting an error for "QTB – Nov 2014 – L1 – SB – Q3 – Operations Research"

MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis

Calculation of the Economic Order Quantity (EOQ) and analysis of the impact of a quantity discount on total inventory costs.

You're reporting an error for "MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis"

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

You're reporting an error for "MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,"

FM – NOV 2016 – L2 – Q5 – Inventory Management

Determines the cost-minimizing order size, calculates the cost of debenture, analyzes the cost of a discount offered to customers, and computes results of a Forward Rate Agreement.

You're reporting an error for "FM – NOV 2016 – L2 – Q5 – Inventory Management"

FM – Nov 2017 – L2 – Q4b – Inventory Management

Calculate the Economic Order Quantity (EOQ), total inventory costs, and the number of orders per year for a manufacturing company.

You're reporting an error for "FM – Nov 2017 – L2 – Q4b – Inventory Management"

QTB – Nov 2014 – L1 – SB – Q3 – Operations Research

Calculate control levels for inventory, expected time for a project, and identify the critical path in a network diagram.

You're reporting an error for "QTB – Nov 2014 – L1 – SB – Q3 – Operations Research"

MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis

Calculation of the Economic Order Quantity (EOQ) and analysis of the impact of a quantity discount on total inventory costs.

You're reporting an error for "MA – Nov 2018 – L2 – Q3a – Cost-volume-profit (CVP) analysis"

MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,

Evaluate a supplier's offer based on Economic Order Quantity and differentiate between a bin card and a store ledger card.

You're reporting an error for "MA – May 2016 – L2 – Q4b – Decision Making Techniques,Relevant Cost and Revenue,"

FM – NOV 2016 – L2 – Q5 – Inventory Management

Determines the cost-minimizing order size, calculates the cost of debenture, analyzes the cost of a discount offered to customers, and computes results of a Forward Rate Agreement.

You're reporting an error for "FM – NOV 2016 – L2 – Q5 – Inventory Management"

FM – Nov 2017 – L2 – Q4b – Inventory Management

Calculate the Economic Order Quantity (EOQ), total inventory costs, and the number of orders per year for a manufacturing company.

You're reporting an error for "FM – Nov 2017 – L2 – Q4b – Inventory Management"

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