Ordering costs – NBC Institute

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 – Nov 2015 – L2 – Q4 – Other aspects of performance measurement

Discuss the relevant costs for EOQ, motives for holding stock, and compute EOQ and associated costs for Quaku Manu Limited.

Question

What are the two most relevant costs for determining the Economic Order Quantity? Give THREE (3) specific examples in each case. (6 marks)
b) Examine the THREE (3) motives for holding stocks. (3 marks)
c) Explain Economic Order Quantity and discuss TWO (2) of its relevance. (3 marks)
d) Quaku Manu Limited purchases and sells CDs. The company has been experiencing stock shortages and excess stocks at certain times in the year. The manager is concerned about the impact of overstocking and understocking and is therefore requesting you to assist in determining the most economic quantity of CDs to order. He has made the following information available to you:

Item	Value
Sales per annum	GHS 20,000,000
Units of items sold	200,000 units
Markup on cost of purchases	25% of purchase price
Ordering cost per order	GHS 200
Holding cost per unit	5% of unit price

Required:
i) Determine the economic order quantity. (2 marks)
ii) What is the annual ordering cost? (2 marks)
iii) Determine the annual holding cost. (2 marks)
iv) How many times in a year will the company order for goods? (1 mark)
v) What is the purchase value per order quantity? (1 mark)
(Total = 20 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: EOQ, Holding costs, Inventory Management, Ordering costs, Stock motives
Level: Level 2

Topic: Other Aspects of Performance Measurement
Series: NOV 2015

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 – Nov 2015 – L2 – Q4 – Other aspects of performance measurement

Discuss the relevant costs for EOQ, motives for holding stock, and compute EOQ and associated costs for Quaku Manu Limited.

Question

Item	Value
Sales per annum	GHS 20,000,000
Units of items sold	200,000 units
Markup on cost of purchases	25% of purchase price
Ordering cost per order	GHS 200
Holding cost per unit	5% of unit price

Answer

Find Related Questions by Tags, levels, etc.

Tags: EOQ, Holding costs, Inventory Management, Ordering costs, Stock motives
Level: Level 2

Topic: Other Aspects of Performance Measurement
Series: NOV 2015

Question Tag: Ordering costs

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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 – Nov 2015 – L2 – Q4 – Other aspects of performance measurement

Discuss the relevant costs for EOQ, motives for holding stock, and compute EOQ and associated costs for Quaku Manu Limited.

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 – Nov 2015 – L2 – Q4 – Other aspects of performance measurement

Discuss the relevant costs for EOQ, motives for holding stock, and compute EOQ and associated costs for Quaku Manu Limited.

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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 – Nov 2015 – L2 – Q4 – Other aspects of performance measurement

Discuss the relevant costs for EOQ, motives for holding stock, and compute EOQ and associated costs for Quaku Manu Limited.

You're reporting an error for "MA – Nov 2015 – L2 – Q4 – Other aspects of performance measurement"

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 – Nov 2015 – L2 – Q4 – Other aspects of performance measurement

Discuss the relevant costs for EOQ, motives for holding stock, and compute EOQ and associated costs for Quaku Manu Limited.

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