Exam 19: Inventory Cost Management Strategies

How many deliveries will Wood Furniture Company require at the economic order quantity?

The annual demand for a company's product is 3,750 units,and monthly demand varies from 200 to 400 units with the following probability of demand: 200 units have a 25 percent probability 300 units have a 50 percent probability 400 units have a 25 percent probability The EOQ model provides an optimal order quantity of 250 units.The opportunity costs of being out of stock are $2 per unit,with a carrying cost of $13 per unit,and the reorder point is 250 units. Required: a.Prepare a table showing stockouts,expected stockout costs,related carrying costs,and total costs,at each level of demand if the selected safety stocks are: 0,50,100 and 150. b.What is the best level of safety stock to carry?

An inventory item of XYZ Manufacturing has an average daily demand of 10 units with a maximum daily demand of 12 units.The economic order quantity is 200 units.The reorder point is 50 units.Safety stocks are set at 94 units. Required: a.Determine the inventory level at the time of reordering. b.Determine the purchase order lead time. d.Determine the maximum purchase order lead time that the company can experience before it has a stockout.

Just-in-time purchasing is the purchase of goods or materials such that delivery immediately precedes demand or use.

The inventory that is held to offset unexpected increases in demand or lead time and unexpected unavailability of stock from suppliers is primarily known as

Hawthorne Ltd.purchases 1,500,000 units of its product every year.The ordering costs are $30 per order and the annual carrying cost of one unit is $1.60.Under its current inventory policy,it purchases the units 150 times during the year,in batches of 10,000 units per order. Required: a.Calculate the EOQ for Hawthorne Ltd. b.By ordering at the EOQ,how much in inventory costs will Hawthorne Ltd.save per year?

How many deliveries will be required at the economic order quantity level?

Answer the following question(s)using the information below. Walton Industries uses backflush costing.For March,there were no beginning inventories of direct materials and no beginning or ending work-in-process.Conversion costs is the only indirect manufacturing cost category currently used.Journal entries are recorded when actual costs are incurred,at completion of finished goods,and at sale of finished goods,under backflush costing. -Which of the journal entries properly records the finished goods trigger point at Walton Industries?

Corry Corporation manufactures filters for cars,vans,and trucks.A backflush costing system is used and standard costs for a filter are as follows: Filters are scheduled for production only after orders are received,and are shipped immediately upon completion.This results in product costs being charged directly to cost of goods sold.In December,3,000 filters were produced and shipped.Materials were purchased at a cost of $8,450 and actual conversion costs of $13,650 were recorded.Variances are written off to Cost of Goods Sold. Required: Prepare journal entries to record December's cost transactions for the production and sale of the filters.

Purchasing costs consist of the costs of preparing and issuing a purchase order.

Party Animals orders 10,400 stuffed tigers per year,at $10 per tiger,FOB destination.Party Animals earns 12% on its cash investments.The purchase order lead time is 3 weeks.The following data are available: What is the cost of the prediction error?

Sequential tracking refers to a method of costing in which the accounting system entries occur at the same order as actual purchases and products.

Answer the following question(s)using the information below: Sandrington Ltd.operates a retail bicycle shop.Wheel covers are popular with customers.Sandrington purchases these covers for $48 per pair,and expects to sell 5,000 pairs per year.Ordering costs are estimated at $180 per order and relevant insurance handling etc.costs are estimated at $3.60 per month.The company has established a 14% annual return on investment. -Which of the following factor(s)would cause an increase in the EOQ?

Use the information below to answer the following question(s). Office Supply House purchases 4,160 reams of paper per year,ordered in lots of 80 reams per week at $150 per ream.The vendor covers all shipping costs.Office Supply House is not required to inspect the shipment upon entry.Office Supply House earns 20% on its cash investments.The purchase order lead time is two weeks.The following cost data are available: -What are the total relevant costs assuming the quantity ordered equals 80 reams?

Answer the following questions using the information below: Acme Inc.manufactures air compressors.For July 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 transferred to finished goods inventory.Acme Inc.uses backflush costing.Variances are written off against Cost of Goods Sold when units are transferred to finished goods inventory.The following data pertains to July: -Which of the following journal entries properly records Acme's direct material costs placed into production for the month of July?

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

Answer the following questions using the information below: The following information applies to Labs Plus,which supplies microscopes to laboratories throughout the country.Labs Plus purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. -What is the economic order quantity at Labs Plus?

Answer the following question(s)using the information below: Sandrington Ltd.operates a retail bicycle shop.Wheel covers are popular with customers.Sandrington purchases these covers for $48 per pair,and expects to sell 5,000 pairs per year.Ordering costs are estimated at $180 per order and relevant insurance handling etc.costs are estimated at $3.60 per month.The company has established a 14% annual return on investment. -The EOQ quantity for Sandrington is:

How many deliveries will be made during each time period?

Answer the following question(s)using the information below: Owen-King Company sells optical equipment.Lens Company manufactures special glass lens.Owen-King Company orders 5,200 lens per year,100 per week at $20 per lens.Lens Company covers all shipping costs.Owen-King Company earns 30% on its cash investments.The purchase order lead time is 2.5 weeks.Owen-King Company sells 125 lens per week.The following data is available: -What is the economic order quantity for Owen-King Company?