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Sergeu [11.5K]
2 years ago
11

6.3) Annie Lennox recently took over a cleaning supply store. Her predecessor always ordered carpet shampoo in quantities of 100

units. Annie is reevaluating this policy. Based on her analysis, the cost to place each order is $35 and the holding cost is $8 per shampoo bottle per year. The annual demand for this product is 2500 bottles. Should Anne change the current order policy and, if so, how much can she save
Business
1 answer:
nata0808 [166]2 years ago
7 0

Answer:

Annie should increase the order size to 148 bottles per order and she will be able to save $91.85 per year.

Explanation:

we must calculate the economic order quantity (EOQ) in order to determine the size of the order that reduces costs:

EOQ = √[(2 x S x D) / H]

  • S = cost per order = $35
  • D = annual demand = 2,500 bottles of shampoo
  • H = holding cost per unit) = $8

EOQ = √[(2 x 35 x 2,500) / 8] = √(175,000 / 8) = √21,875 = 147.90 ≈ 148 bottles of shampoo

total cost when ordering 100 bottles = (25 orders x $35) + (100/2 x $8) = $875 + $400 = $1,275

total cost when ordering 148 bottles = (16.89 orders x $35) + (148/2 x $8) = $591.15 + $592 = $1,183.15

Annie will save $1,275 - $1,183.15 = $91.85 per year

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Answer:

$13,300 for each of the four years

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Explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

( $55,060 - $1,860) / 4 = $13,300 each year

Activity method based on hours worked = (hours worked that year / total hours of the machine) x  (Cost of asset - Salvage value)

( $55,060 - $1,860) / 7600 = 7

year 1 = 7 x 1400 = 9800

year 2 = 7 x 2700 = $18900

year 3 = 7 x 2300 = $16100

year 4 = 7 x 1200 = $8400

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life) = 2/4 = 0.5

Year 1 = $55,060 x 0.5 = 27530

book value =  $55,060 - 27530 = 27530

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Answer:

The correct answer is d.

Explanation:

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