Calculating the eoq


Question 1: Calculate the EOQ if the company is expecting to sell 5,000 units, has a $2 per unit carrying cost, and has a cost of $10 per order. Why should you not use the EOQ without additional consideration in "real life" situations?

Question 2: If a company is considering buying a new machine for $100,000 that should reduce costs by $80,000 in one year and $50,000 in second year, should they do it if they have a cost of capital of 10%?

Question 3: A company faces a tax rate of 40% with their division in NZ and a tax rate of 25% in the US. They make and sell 1,000 units. It costs $125 per unit to produce the units in NZ and they can sell them for $300 each in the US.

What transfer price (between $0 and $300) would provide the greatest overall profit? Explain or show.

What transfer price (between $0 and $300) would result in the lowest overall profit?

Explain or show.

Calculate the profit if the transfer price is set at $140 per unit.

Solution Preview :

Prepared by a verified Expert
Finance Basics: Calculating the eoq
Reference No:- TGS01825563

Now Priced at $25 (50% Discount)

Recommended (91%)

Rated (4.3/5)