Question

5. The purchase-order lead-time is a. The difference between the times an order is placed and delivered. b. The difference between the products ordered and the products received. C. The discrepancies in purchase orders. d. The time required to correct errors in the products received. 6. If the purchase price per unit is constant, the carrying cost per unit is constant, and the ordering cost per order is constant, then the annual relevant total costs of having to have an inventory are at a minimum when a. Relevant ordering costs are greater than the relevant carrying costs b. Relevant carrying costs are greater than the relevant ordering costs. c. d. Relevant carrying costs are equal to relevant ordering costs None of the above. THE FOLLOWING APPLIES TO THE NEXT 2 QUESTIONS Based on its annual needs, ABC Company buys 10,000 units of Product X from its supplier at a purchase price of $50/unit, and has the following information available concerning this item: Relevant ordering costs per purchase order $200 Relevant carrying costs/unit per year: Required annual return on investment 10% (Hurdle Rate) Required other costs per year insurance, etc.) $3.00 HINT: When you are calculating total carrying cost/unit, don't forget to add opportunity cost to the $3.00/unit.

Answer 1

As per HOMEWORKLIB RULES we can answer only 4 sub questions in a single question i am answering the first 4 questions. Student may re upload the remaining questions.

1. b. Difference between the products ordered and the products received. Purchase order lead time refers to the time taken for raw material from the time that is ordered till the time that is received.
2. c. Relevant carrying costs are equal to the relevant ordering costs. As per the Economic Order quantity definition, the total cost of inventory will be low when the ordering cost equals carrying cost and it will be the optimum quantity to be ordered.
3. d. 707. Formula = √2AO/C, A = annual consumption = 10,000 units, O = ordering cost = 200, C = carrying cost + opportunity cost = 50*10% + 3 = 8. Therefore EOQ = √2*10,000*200/8.
4. b. 5,656. Relevant total cost at EOQ = 707 units x 8 per unit = 5,656.

Questions 1,2,3,4 represent 5,6,7,8 respectively.