Bernard Company uses 6,000 grams of silver each year to produce jewelry. The cost of placing an order is £2,000. The annual cost of holding one gram of silver is £50. Bernard currently places four orders of 1,500 grams each.
Required:
a.
Compute the annual cost of the current inventory policy.
b.
Compute the cost that Bernard would incur if it used economic order quantity.
c.
Compute the amount that Bernard would save if it used economic order quantity rather than the current policy.

Question

Quizplus · Accepted Answer

The Answer of Bernard Company uses 6,000 grams of silver each year to produce jewelry. The cost of placing an order is £2,000. The annual cost of holding one gram of silver is £50. Bernard currently places four orders of 1,500 grams each.
Required:
a.
Compute the annual cost of the current inventory policy.
b.
Compute the cost that Bernard would incur if it used economic order quantity.
c.
Compute the amount that Bernard would save if it used economic order quantity rather than the current policy.

Bernard Company Uses 6,000 Grams of Silver Each Year to Produce