Cohen Industrial Products uses 2,100 switch assemblies per week and then reorders another 2,100. The relevant carrying cost per switch assembly is $18, and the fixed order cost is $300. What is the EOQ?
EOQ = [(2 × 52 × 2,100 × 300)/$18]½ = 1,907.88
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91.
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Roger's Store begins each week with 150 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $48 per year and the fixed order cost is $70. What is the optimal number of orders that should be placed each year?
EOQ = [(2 × 52 × 150 × $70)/$48]1/2 = 150.83
Number of orders per year = 52(150)/150.83 = 51.71 |
92.
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The Dilana Corporation is considering a change in its cash-only policy. The new terms would be net one period. The required return is 2 percent per period. What is the NPV of the new policy given the following information?
Cash flow from old policy = ($71 - $36) (3,500) = $122,500
Cash flow from new policy = ($74 - $36) (3,560) = $135,280 Incremental cash flow = $135,280 - $122,500 = $12,780 NPV of new policy = - [$71(3,500) + $36(3,560 - 3,500)] + $12,780/0.02 = $388,340 |
93.
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The Cycle Shoppe has decided to offer credit to its customers during the spring selling season. Sales are expected to be 330 bicycles. The average cost to the shop of a bicycle is $300. The owner knows that only 93 percent of the customers will be able to make their payments. To identify the remaining 7 percent, she is considering subscribing to a credit agency. The initial charge for this service is $540, with an additional charge of $6 per individual report. What is the amount of the net savings from subscribing to the credit agency?
Net savings = (330 × $300 × 0.07) - $540 - (330 × $6) = $4,410
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