Problem 1: Order Point and Safety Stock

A. Irene Corp has a lead time for ordering stock of 9 days,

with a stock demand per day of 1,000 units

Required: Calculate the Order point

Usage 1,000
x Lead time 5
Total 5000
Add: Safety Stock 0
Order point 5000

B. Assuming Irene Corp does not always receive the delivery of items on time
and the company wants to have 3 days of stock on hand at all times.

Required: Calculate the reorder point and safety stock

Average daily use 1,000

x Lead time 3
Safety stock 3,000

Lead time 9
x Average daily use 1,000
Total 9,000
Add: Safety stock 3,000
Reorder Point 12,000
Problem 2: Order Point and Safety Stock

A. Ailene Corp. is a retailer of bags. It sells 1,500 units of one of a famous

brand daily. It supplier takes a week to deliver the order

Required: Compute the reorder point

Lead time 7
x Average daily use 1,500
Total 10,500
Add: Safety stock -
Reorder Point 10,500

B. Assuming, Ailene Corp. has decided to hold a safety stock

equivalent to average usage of 2 days.

Required: Compute the reorder point

Lead time 7
x Average daily use 1,500
Total 10,500
Add: Safety stock 3,000
Reorder Point 13,500
Problem 3: EOQ and Total Carrying cost
Gerald Inc. has an annual usage of 2,500 units of material Y, having a purchase price of P500 per unit. Th
following data are available for Material Y.

Ordering cost P25 per order

Carrying cost percentage 10%

𝐸𝑂𝑄=√((2×2500×25)/
█(500∗10%@))

= √125,000/50
= 50

Total carrying cost =25*50 1,250

hase price of P500 per unit. The
Problem 3: EOQ and Total Carrying Cost

Hurom Corp. has the following data available relative to its investment in materials:
Number of units of material used annually…............................
Number of workdays in a year…...............................................
Cost of placing an order….........................................................
Annual carrying cost per unit of inventory…..............................

Instructions:
1. Compute the economic order quantity
2. Using the above dat, compute the order size that results in the minimum total order and carring cost b
completing the following table

20,000/ (1) (2) *20 (1) / 2 (4) * 5 (3) + (5)

(1) (2) (3) (4) (5) (6)

Total Total Total Order

Order Number of Average
Order Carrying and Carrying
Size orders Inventory
Cost amount Cost

100 200 4,000 50 250 4,250

200 100 2,000 100 500 2,500
300 67 1,333 150 750 2,083
400 50 1,000 200 1,000 2,000
500 40 800 250 1,250 2,050
600 33 667 300 1,500 2,167
700 29 571 350 1,750 2,321
800 25 500 400 2,000 2,500

3. If the company requires a safety stock of 200 units and has been anticioated lead
time of 5 days, What is the order point

Usage 80
x Lead time 5
Total 400
Add: Safety Stock 200
Order point 600

Total Order
and Safety
Carrying Lead Time Total Stock Order Point
Cost
4,250.00 5 21,250.00 200 21,450.00
2,500.00 5 12,500.00 200 12,700.00
2,083.33 5 10,416.67 200 10,616.67
2,000.00 5 10,000.00 200 10,200.00
2,050.00 5 10,250.00 200 10,450.00
2,166.67 5 10,833.33 200 11,033.33
2,321.43 5 11,607.14 200 11,807.14
2,500.00 5 12,500.00 200 12,700.00
 20,000
250
₱ 20.00
₱ 5.00

m total order and carring cost by

Problem 5: EOQ and No. of Order per year
Ivan estimates a need for 225,000 material A next year at a cost of P300 per unit. The
estimated carring cost is 20% and the cost to place an order is P1,200

EOQ = √2(225,000)(1,200)/ 300*20%

= √ 540,000,000/ 60
= √9000000
= 3,000

No. of orders per year = 225,000/3,000

= 75
Problem 6: Carrying cost
Determine the carrying cost for an item costing P2,000, given
the following unit cost information:

Storage cost 10
Handling cost 25
Production Labor Cost 6
Insurance cost 15
Opportunity cost 10% of investment
Problem 7: EOQ
Determine the EOQ from the following data:

Annual usage of materials 600,000 units

Cost of materials per unit ₱ 2,000.00
Cost of placing one order ₱ 6,000.00
Annual carrying cost per unit 10% of inventory value

EOQ = √2(600,000)(6,000)/2,000*10%
= √7,200,000,000/200
= 600
Problem 8: EOQ
John maintains three products A,B, and C. Determine the EOQ for each product, given the following
information: (Round off your answer to the nearest whole number).

Product Carrying cost Ordering cost Demand

A 5 9 90,000
B 4 10 60,000
C 3 12 40,000

EOQ = √2(90,000)(9)/5
= √1,620,000/5
= 569

EOQ = √2(60,000)(10)/4
= √1200000/4
= 17,321

EOQ = √2(40,000)(12)/3
= √960,000/3
= 566
product, given the following
Problem 9: EOQ, Reorder Point and safety stock

Marie Corp. is engaged in production of bikes. It purchases tire from Shey Corp., a supplier. Shey takes
10 days in manufacturing and delivering an order. Marie requires 4,320 units of tires annually. Its
ordering cost is P500 per order and its carrying costs are P5 per unit per year. The maximum usage per
day could be 20 per day.

EOQ = √2(4,320)(500)/5
= √4,320,000/5
= 930
ey Corp., a supplier. Shey takes
units of tires annually. Its
year. The maximum usage per
Problem 10: Order point
Irvin Corp has developed the following figures to assist in
controlling one of the material:

Minimum daily use 300 units

Normal daily use 400 units
Maximum daily use 460 units
Working days per year 250 days
Lead time in working days 10
Safety stock ? Units
Cost of placing an order ₱ 80.00
EOQ 4000 units

Required: Compute the following:

1. Safety stock
2. Order point
3. Average inventory
4. Normal maximum inventory
5. Absolute maximum inventory
6. Carrying cost per unit for one year

1 Maximum daily use 460

Normal daily use 400
Difference 60
Lead time in working days 10
Safety stock 600

2 Usage 400
X lead time 10
Total 4000
Add: Safety stock 600
Order point 4600

3 EOQ 4000
Divide by 2
Average inventory 2000
Add: Safety stock 600
Total Average inventory 2600

4 Order point 4600

 less: average daily use x lead time 4000
Total 600
Add: EOQ 4000
Normal maximum inventory 4600

5 Order point 4600

Less: Minimum daily use* lead time 3000
Total 1600
Add: EOQ 4000
Absolute maximum inventory 5600

6 EOQ= SQRT [( 2 * average annual usage* cost per order)/carrying cost per unit per year]
4000 = SQRT[2*400*80)/carrying cost per unit per year]
4000^2 = 64,000/carrying cot per unit per year
4000^2 Carrying cost per
=
64,000 unit per year

250 = Carrying cost per

unit per year

Mali yung #6
arrying cost per unit per year]
Problem 11: Estimated Annual Demand
Julius Corp has the following data: economic order quantity is 14,400 units, carrying
cost per unit is P3.15 and ordering cost per order is P1,260.

Required: Determine the annual estimated demand:

EOQ = √2(14,400)(1,260)/3.15
= √36,288,000/3.15
= 3,394

Mali ka
Problem 12: Annual Carrying Cost
Irene Corp has determined that its EOQ is 20,000 units. Based on the EOQ, the firm's annual o
unit is P4,175. Given this information, what is the firm's annual carrying cost?

Annual carrying cost =( 20,000/2)*4175

41,750,000.00

Ordering cost is equal to carrying cost kaya 4,175 pa din sagot

d on the EOQ, the firm's annual ordering cost for the
ual carrying cost?

pa din sagot
Problem 13: EOQ and Order Point

Mars Malungay Pandesalan operates 365 days a year. Mr. Cali finds that he seems to order ei
ingredients for his Pandesalan. Mr. Cali asks Mr. Doy for help. An examination of the data of t

Annual usage of flour

Average number of days delay between ordering and receiving
Estiamated cost per order
Estimated annual cost of carrying a lb. of flour

Required: Calculate the EOQ and appropriate order point

EOQ = √2(14,000)(62)/1
= √1,736,000/1
= 1,318
nds that he seems to order either too little or too much
n examination of the data of the company reveals that:

14,000 lbs.
24
₱ 62.00
₱ 1.00
Problem 14: Inventory Costing Method
The records of Ivan Corporation, which maintains a perpetual inventory system, recorded the
following information about its inventory:

Units Unit Cost Total Cost Units on Hand

Balance Jan. 1 5,000.00 100.00 500,000.00 5,000.00
Purchased Jan. 10 3,000.00 300.00 900,000.00 8,000.00
Sale Jan. 20 4,500.00 3,500.00
Purchased Jan. 28 2,000.00 500.00 1,000,000.00 5,500.00

Required: Compute the amount of ending inventory at Jan. 31, using

a. Weighted average method
b. LIFO Method
c. FIFO Method
 a. Weighted average method
tem, recorded the Purchase Issuance
Date
Units Unit Cost Total Units Unit Cost
Jan.1
ts on Hand Jan. 10 3,000.00 300.00 900,000.00
Jan. 20 4,500.00 175.00
Jan. 18 2,000.00 500.00 1,000,000.00

b. LIFO Method
Purchase Issuance
Date
Units Unit Cost Total Units Unit Cost
Jan.1
Jan. 10 3,000.00 300.00 900,000.00

Jan. 20 3,000.00 300.00

1,500.00 100.00
Jan. 18 2,000.00 500.00 1,000,000.00

c. FIFO Method
Purchase Issuance
Date
Units Unit Cost Total Units Unit Cost
Jan.1
Jan. 10 3,000.00 300.00 900,000.00

Jan. 20 4,500.00 100.00

Jan. 18 2,000.00 500.00 1,000,000.00

Issuance Balance
Total Units Unit Cost Total
5,000.00 100.00 500,000.00
8,000.00 175.00 1,400,000.00
787,500.00 3,500.00 175.00 787,500.00
5,500.00 325.00 1,787,500.00
Total: 5,500.00 1,787,500.00

Issuance Balance
Total Units Unit Cost Total
5,000.00 100.00 500,000.00
5,000.00 100.00 500,000.00
3,000.00 300.00 900,000.00
900,000.00
150,000.00 3,500.00 100.00 350,000.00
3,500.00 100.00 350,000.00
2,000.00 500.00 1,000,000.00
Total: 5,500.00 1,350,000.00

Issuance Balance
Total Units Unit Cost Total
5,000.00 100.00 500,000.00
5,000.00 100.00 500,000.00
3,000.00 300.00 900,000.00
450,000.00 500.00 100.00 50,000.00
3,000.00 300.00 900,000.00
500.00 100.00 50,000.00
3,000.00 300.00 900,000.00
2,000.00 500.00 1,000,000.00
Total: 5,500.00 1,950,000.00
Problem 15: Inventory Valuation
Shiela has five product lines. On Dec. 31,2030, the company provided the following data:

Product Units Unit Cost NRV per unit

A 500.00 500.00 510.00
B 1,000.00 250.00 225.00
C 1,500.00 750.00 800.00
D 2,000.00 375.00 385.00
E 2,500.00 125.00 100.00

REQUIRED: Compute the total inventory on Dec. 31, using the lower of cost and net realizable value

Product Units Unit Cost Total Cost Units

A 500.00 500.00 250,000.00 500.00
B 1,000.00 250.00 250,000.00 1,000.00
C 1,500.00 750.00 1,125,000.00 1,500.00
D 2,000.00 375.00 750,000.00 2,000.00
E 2,500.00 125.00 312,500.00 2,500.00
ed the following data:

r of cost and net realizable value

NRV per unit Total NRV Lower

510.00 255,000.00 250,000.00
225.00 225,000.00 225,000.00
800.00 1,200,000.00 1,125,000.00
385.00 770,000.00 750,000.00
100.00 250,000.00 250,000.00
Problem 16: Inventory Costing Method
The inventory stock card of Beth Corporation on Jan. 2030 is as follows a. Weighted average method

Purchase Units Balance

Price Units Sold Units
Jan. 1 100 10,000 10,000
Jan. 15 5,000 5,000
Jan. 18 110 15,000 20,000
Jan. 20 100 500 20,500
Jan. 30 5,500 15,000

REQUIRED: Compute the ending inventory cost using

a. Weighted average method b. FIFO Method

b. FIFO Method
c. LIFO Method

c. LIFO Method
a. Weighted average method
Date Purchase Issuance Balance
Units Unit Cost Total Units Unit Cost Total Units
Jan.1 10,000.00 100.00 1,000,000.00 10,000.00
Jan. 15 5,000.00 100.00 500,000.00 5,000.00
Jan. 18 15,000 110.00 1,650,000.00 20,000.00
Jan. 20 500.00 100 50,000.00 20,500.00
Jan. 30 5,500.00 107.32 590,260.00 15,000.00
Total: 15,000.00

b. FIFO Method
Purchase Issuance Balance
Date
Units Unit Cost Total Units Unit Cost Total Units
Jan.1 10,000.00 100.00 1,000,000.00 10,000.00
Jan. 15 5,000.00 100.00 500,000.00 5,000.00
Jan. 18 15,000.00 110.00 1,650,000.00 5,000.00
15,000.00
Jan. 20 500.00 100.00 50,000.00 5,000.00
15,000.00
500.00
Jan. 30 5,000.00 100.00 500,000.00 14,500.00
500.00 110.00 55,000.00 500.00
Total: 15,000.00

c. LIFO Method
Purchase Issuance Balance
Date
Units Unit Cost Total Units Unit Cost Total Units
Jan.1 10,000.00 100.00 1,000,000.00 10,000.00
Jan. 15 5,000.00 100.00 500,000.00 5,000.00
Jan. 18 15,000.00 110.00 1,650,000.00 5,000.00
15,000.00
Jan. 20 500.00 100.00 50,000.00 5,000.00
15,000.00
500.00
Jan. 30 500.00 100.00 50,000.00 5,000.00
4,500.00 110.00 495,000.00 10,500.00
Total: 15,500.00
Balance
Unit Cost Total
100.00 1,000,000.00
100.00 500,000.00
107.50 2,150,000.00
107.32 2,200,000.00
107.32 1,609,740.00
1,609,740.00

Balance
Unit Cost Total
100.00 1,000,000.00
100.00 500,000.00
100.00 500,000.00
110.00 1,650,000.00
100.00 500,000.00
110.00 1,650,000.00
100.00 50,000.00
110.00 1,595,000.00
100.00 50,000.00
1,645,000.00

Balance
Unit Cost Total
100.00 1,000,000.00
100.00 500,000.00
100.00 500,000.00
110.00 1,650,000.00
100.00 500,000.00
110.00 1,650,000.00
100.00 50,000.00
100.00 500,000.00
110.00 1,155,000.00
1,655,000.00
 Problem 17: Gross vs. Net Method

ABC Corp. purchased materials at an invoice price of P200,000; terms 1/10, n/30 on Apr. 1, 2020

Required: Prepare journal entries using:

A. Gross Method
1. Assume paid within the discount period
2. Assume not paid within the discount period

B. Net Method
1. Assume paid within the discount period
2. Assume not paid within the discount period

A Date Account Title and Description Debit Credit

Materials 200,000.00
Accounts payable 200,000.00
To record purchased of materials

Accounts payable 200,000.00

Materials 2,000.00
Cash 198,000.00
To record payment within discount period

Accounts payable 200,000.00

Cash 200,000.00
To record payment not within the discount period

B Materials 198,000.00
Accounts payable 198,000.00
To record purchased of materials

Accounts payable 198,000.00

Cash 198,000.00
To record payment within discount period

Accounts payable 198,000.00

Loss on purchase discount 2,000.00
Cash 200,000.00
To record payment not within the discount period
0 on Apr. 1, 2020