Accounting - Analysis

Accounting - Analysis

Answer # 2

EOQ = 2 (annual requirement) (cost per order) / annual carrying cost per unit

EOQ = (550*12) (30)] / (3000 / 550) + 5.5

EOQ = EOQ = EOQ = 850 orders

Total annual ordering cost = Annual Requirements / EOQ * S = 1100 / 850 * 30 = $39

Total annual Carrying cost = (EOQ/2) * H = (850/2) * 10.95 = $4653.75



Magpies Ltd

Quality Cost Report

August 2011

Amount

Prevention Costs

-Material Inspection

$5400

- Quality System development

$2160

- Quality training

$1440

Appraisal Costs

-Laboratory testing

Internal Failure Costs

$3000

-Out of warranty repair and replacement

$30000

-Scrapped finished goods

$9960

- Rework

$8040

External Failure Costs

-Contribution margin forgoes

$6000

Total

$66000

Managers can ...