Question 1
Discuss considerations that should be fully taken into account when developing inventory related relevant costs for use in an economic order quantity (EOQ) model.
Question 2
Due to unprecedented growth during the year, Flowers by Kelly decided to use some of its surplus cash to increase the size of several inventory order quantities that had been previously determined using an EOQ model.
Required:
Identify whether increasing the size of inventory orders will increase, decrease, or have no effect on each of the following items.
| ________ | a. | Average inventory |
| ________ | b. | Cost of goods sold |
| ________ | c. | Number of orders per year |
| ________ | d. | Total annual carrying costs |
| ________ | e. | Total annual carrying and ordering costs |
| ________ | f. | Total annual ordering costs |
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