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Viefleur [7K]
3 years ago
9

A produce distributor uses 774 packing crates a month, which it purchases at a cost of $12 each. The manager has assigned an ann

ual carrying cost of 34 percent of the purchase price per crate. Ordering costs are $29. Currently the manager orders once a month. How much could the firm save annually in ordering and carrying costs by using the EOQ? (Round intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.)
Business
1 answer:
ki77a [65]3 years ago
6 0

Answer:

$444.42

Explanation:

For computing the saving amount, first need to calculate the economic order quantity, total cost etc

The economic order quantity is

= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}

where,

Annual demand is

= 774 packaging crates × 12 months

= 9,932 crates

And, the carrying cost is

= $12 × 34%

= $4.08

= \sqrt{\frac{2\times \text{9,288}\times \text{\$29}}{\text{\$4.08}}}

= 363.37 crates

Now the total cost is

= Annual ordering cost + Annual carrying cost

= Annual demand ÷ Economic order quantity × ordering cost per order + Economic order quantity ÷ 2 × carrying cost per unit

= 9,288 ÷ 363 × $29 + 363 ÷ 2 × $4.08

= $742.02 + $740.52

= $1,482.54

Now the total cost in case of 774 packing crates is

= Annual ordering cost + Annual carrying cost

= Annual demand ÷ Economic order quantity × ordering cost per order + Economic order quantity ÷ 2 × carrying cost per unit

= 9,288 ÷ 774 × $29 + 774 ÷ 2 × $4.08

= $348 + $1,578.96

= $1,926.96

So, the annual saving cost is

= $1,926.96 - $1,482.54

= $444.42

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Dafna1 [17]

Answer:

a. Straight Line Method Depreciation= $ 2400

b. MACRS

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Explanation:

a. Straight Line Method Depreciation=

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=120,000/10* 20%= 12000* 20/100=$ 2400

b. MACRS

Since it is a non-form 10-year property, the company can elect to use either the 150% or 200% declining balance method.

Depreciation in 1st Year = Cost × 1/Useful Life × A × Depreciation Convention

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Depreciation for the the first year $ 150,000/10 *200%= $30,000

Depreciation for the the 2nd year =$ 150,000-30,000/10 *200%= $24,000

Depreciation for the the third year =$ 150,000-30,000- 24000/10 *200%

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Note A: MACRS declining balance changes to straight-line method when that method provides an equal or greater deduction. Deduction under 200% declining balance MACRS for 4th year  would be $ 153,600 ($150000 - $30,000 - $24000 - $19200  × 1/10 × 200%. This is greater than depreciation under straight line method .

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Depreciation Amount = Acquisition Cost - Salvage Value = $ 120,000

Sum of useful life= 10+9+8+7+6+5+4+3+2+1= 55

Depreciation Factor = 10/55, 9/55, 8/55, 7/55 etc.

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Depreciation for the 2nd year= 9/55* 120,000= $ 19 636.4

Depreciation for the 3rd year= 8/55* 120,000=  $17,546

Depreciation for the 4th year= 7/55* 120,000=  $ 15,273

Depreciation for the 5th year= 6/55* 120,000= $ 13,091

Depreciation for the 6th year= 5/55* 120,000= $ 10,909.1

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