BBC has average accounts payable balance of \$500,000. Its average daily cost of goods sold is \$15,000, and it receives terms of 2/15, net 35, from its suppliers. BBC chooses to forgo the discount. Is the firm managing its accounts payable well?

The typical sum of days that will be taken for BBC to wage its sellers is 33.33 days. It is calculated as 500000/15000. The vendor is not repaying nearly timely enough to obtain the discount, but they are still reimbursing by the very last day to wage their invoice which is 35 days. There is no impairment and no obscene for them to be repaying in this method. But, they are not handling the account pay-able sound. If the company has to give payment in partial to that time, they might obtain the concession and could free-up additional cash.

Max Corp. has average accounts payable balance of \$225,000. Its average daily cost of goods sold is \$10,000, and it receives terms of 1/15, net 40, from its suppliers. Max chooses to forgo the discount. Is the firm managing its accounts payable well?

With an average day to recompense the sellers period of around 22.5 days, the Max Corp is not the captivating complete benefit of the point that if they just rewarded their sellers 7.5 days earlier, they might catch the concession and free-up the cash. There is no purpose for Max Corporation to be the remunerating full amount for repaying in over a week too late. At 22.5 days, they are also near to the reduction period and also away from the previous day to pay.

Sports Mart sells 500,000 baseballs annually. The baseballs cost Sports Mart \$24 per dozen (\$2.00 each). Annual inventory carrying costs are 25% of inventory value and the cost of placing and receiving an order are \$78. Determine the:

Economic Order Quantity

Total Selling = 500000

Setup cost = \$78

Carrying cost: 2* \$0.25 = \$0.50

=2 *(\$78) * (500000) / (\$0.50)
So Economic Order Quality = 12,490 (1,040/dozen)
Total annual inventory costs of this policy

Total annual inventory costs of this policy = 2 * (500000) + 12/2 + 78/12 = 1000000 +6 +936 = 100,942
Optimal ordering frequency
Optimal Ordering frequency = 365 * 12490 = 4558850

Nike sells 1,000,000 basketballs annually. The baseballs cost Nike \$180 per dozen (\$15.00 each). Annual inventory carrying costs are 20% of inventory value, and the cost of placing and receiving an order is \$150. Determine the:

Economic Order Quantity

Total Selling = 1000000

Setup cost = \$150

Carrying cost: 2* \$0.20 = \$0.40

=2 *(\$150) * (1000000) / (\$0.40)
So Economic Order Quality = 750000000 (6250000/dozen)

Total annual inventory costs of this policy

Total annual inventory costs of this policy = 2 * (1000000) + 15/2 + 150/12 = 2000000 +7.5 +12.5 = 2000020

Optimal ordering frequency

Optimal Ordering frequency = 365 * 750000000 = 273750000000

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