Exam 20: Inventory Cost Management Strategies

The executive vice president of Robotics, Inc., is concerned because the cost of materials has not been in line with the budget for several periods, even after implementing an EOQ model. The company has the normal direct material variance computations of price and efficiency at the end of each month. The price variance of the direct materials used is usually near expectations. The vice president does not understand how the budget differences are always larger than the material price variances. Required: What explanation can you give for the evaluation problems presented?

Backflush costing is an example of sequential tracking.

Answer the following question(s) using the information below: Green Grass Incorporated is a distributor of golf balls. Garry's Golf Supplies is a local retail outlet which sells golf balls. Garry's purchases the golf balls from Green Grass Incorporated at $0.75 per ball; the golf balls are shipped in cartons of 72. Green Grass Incorporated pays all incoming freight, and Garry's Golf Supplies does not inspect the balls due to Green Grass' reputation for high quality. Annual demand is 172,800 golf balls at a rate of 3,322 balls per week. Garry's Golf Supplies earns 12% on its cash investments. The purchase-order lead time is one week. The following cost data are available: -What is the economic order quantity?

Companies can achieve significant gains by sharing information and coordinating activities throughout the supply chain.

When there is an inconsistency between the decision model and the model used to evaluate the performance of the person implementing the model, ________ arise.

The IBP Grocery orders most of its items in lot sizes of 10 units. Average annual demand per side of beef is 720 units per year. Ordering costs are $25 per order with an average purchasing price of $100. Annual inventory carrying costs are estimated to be 40 percent of the unit cost. Required: a. Determine the economic order quantity. b. Determine the annual cost savings if the shop changes from an order size of 10 units to the economic order quantity. c. Since the shelf life is limited the IBP Grocery must keep the inventory moving. Assuming a 360-day year, determine the optimal lot size under each of the following: (1) a 20-day shelf life and (2) a 10-day shelf life.

The "flush" in backflush refers to the fact that there are no variances in a backflush costing system using standard costs.

The annual relevant carrying costs of inventory consist of incremental costs plus the opportunity cost of capital.

Financial performance measures are the predominant measures of control in a Just-in-Time system.

Backflush costing describes a costing system that omits recording some journal entries.

Just-in-Time (JIT) Production is a system in which each component on a production line is produced immediately as needed by the next step in the production line.

What is a supply chain, and what are the benefits of a supply chain analysis? Provide an example of these benefits.

Due to unprecedented growth during the year Denise's Flowers 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: For each of the following items tell whether the action caused an increase, a decrease, or no change to the EOQ. 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

Use the information below to answer the following question(s). Fun 'N' Games manufactures various board games. For January there were no beginning inventories of direct materials, and no beginning or ending work in process. Only one indirect manufacturing cost category is currently in use, "Conversion Costs." Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing. -Complete Microfilm Products manufactures microfilm cameras. For October there were no beginning inventories of direct materials, and no beginning or ending work in process. Only one indirect manufacturing cost category is currently in use, "Conversion Costs." Journal entries are recorded when materials are purchased and when units are sold. Which of the following journal entries would be recorded when units are sold for the month?

Use the information below to answer the following question(s). Fun 'N' Games manufactures various board games. For January there were no beginning inventories of direct materials, and no beginning or ending work in process. Only one indirect manufacturing cost category is currently in use, "Conversion Costs." Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing. -Which of the following entries properly records the cost of goods sold for the month?

The term, supply-chain, describes the flow of goods, services and information from cradle to grave, regardless of whether those activities occur in the same organization or in other organizations.