Exam 17: Inventory Management, Just-In-Time and Simplified Costing Methods

In managing inventory,in which of these categories are the costs associated with inventory storage included in? Variant question

Answer the following questions using the information below: Appleby Incorporated is a distributor of golf balls.Kel's Golf Supplies is a local retail outlet which sells golf balls.Kel's purchases the golf balls from Appleby Incorporated at $0.75 per ball;the golf balls are shipped in cartons of 72.Appleby Incorporated pays all incoming freight,and Kel's Golf Supplies does not inspect the balls due to Appleby' reputation for high quality.Annual demand is 172 800 golf balls at a rate of 3322 balls per week.Kel's Golf Supplies earns 12% on its cash investments.The purchase-order lead time is one week.The following cost data are available: Relevant ordering costs per purchase order $\quad\quad\quad\$ 125.00$ Carrying costs per carton per year: Relevant insurance, materials handling, breakage, etc,, per year $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\$ 0.77$ -If Kel's makes an order (1/12 of annual demand)once per month,what are the relevant total costs?

In which way does a management accountant aid in MRP? Variant question

An inventory item of Kalgoorie Manufacturing has an average daily demand of 30 units with a maximum daily demand of 27 units.The economic order quantity (EOQ)is 250 units.Without safety stocks,the reorder point is 50 units.Safety stocks are set at 112 units. Required: a.Determine the reorder point with safety stocks. b.Determine the maximum inventory level. c.Determine the average lead time. d.Determine the maximum lead time. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Earthmovers Corporation produces bucket loader assemblies for the tractor industry.The product has a long-term life expectancy.Earthmovers,who has a traditional manufacturing and inventory system,is considering the installation of a just-in-time inventory system to improve its cost structure.After a full study by its manufacturing engineering team,industry JIT experts and the main vendors and suppliers of the components used to manufacture the bucket loader assemblies,Earthmovers has developed the following incremental cost-benefit relevant information: - Earthmovers cost of investment capital hurdle rate is 15%. - One-time cost to rearrange the shop floor to create the manufacturing cell workstations is $325 000. - One-time cost to retrain the existing workforce for the JIT required skills is $160 000. - Anticipated defect reduction is 40%.Currently there is a cost of quality defect assessment listed as $200 000 per year. - The setup time for each of the existing functions will be reduced by 67%.Currently the forecast for setup costs are $270 000 per year. - Earthmovers will expect to save $200 000 per year in carrying costs as a result of having a lower inventory. The suppliers will require a 15% premium over the current level of prices in order to position themselves to supply the material on a smaller and more frequent schedule.Currently the materials purchases are $200 000 per year. Required: Determine whether it is in the best interest of Earthmovers Corporation to install a JIT system. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Just-in-time purchasing describes the flow of goods,services,and information from the initial sources of materials and services to the delivery of products to consumers,regardless of whether those activities occur in the same organisation or in other organisations.

Armidale Distributors is a distributor of DVDs.El Cheapo Electronics is a local retail outlet which sells blank and recorded DVDs.El Cheapo Electronics purchases DVDs from Armidale Distributors at $0.50 per DVD;DVDs are shipped in packages of 100.Armidale Distributors pays all incoming freight,and El Cheapo Electronics does not inspect the DVDs due to Armidale Distributors' reputation for high quality.Annual demand is 104 000 DVDs at a rate of 2000 DVDs per week.El Cheapo Electronics earns 20% on its cash investments.The purchase-order lead time is two weeks.The following cost data are available: Relevant ordering costs per purchase order \ 45.50 Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc, per year \ 2.50 What is the required dollar annual return on investment per package?

Answer the following questions using the information below: The Katoomba Furniture company produces a specialty dining table,and has the following information available concerning its inventory items: Relevant ordering costs per purchase order \ 250 Relevant carrying costs per year: Required annual return on investment 10\% Required other costs per year \ 14.00 Annual demand is 1000 tables per year.The purchase price per table is $1600. -What are the total relevant costs,assuming the quantity ordered equals 50 units?

Answer the following questions using the information below: The Katoomba Furniture company produces a specialty dining table,and has the following information available concerning its inventory items: Relevant ordering costs per purchase order \ 250 Relevant carrying costs per year: Required annual return on investment 10\% Required other costs per year \ 14.00 Annual demand is 1000 tables per year.The purchase price per table is $1600. -The annual relevant total costs are at a minimum when relevant:

What is considered one disadvantage of an enterprise resource planning (ERP)system? Variant question

Which essential costs should be considered when developing inventory-related relevant costs for use in an economic order quantity (EOQ)model? Why? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Managing inventories to increase net profit requires companies to effectively manage costs associated with goods for sale. Required: Classify the below listed items as either Purchasing Costs,Ordering Costs,Carrying Costs,Stockout Costs,Costs of Quality or Shrinkage Costs. a. costs of obtaining purchase approvals b. costs resulting from embezzlement by employees c. internal failure costs d. coportunity cost of the investment tied up in inventory e. spoilage of stored items f. costs of lost sales as a result of not having an iten requested by a customer g. costs of incoming freight h. costs of matching invoices received to the items and the i. curchase orders i. costs of wages for work-in-process inspections a.costs of obtaining purchase approvals b.costs resulting from embezzlement by employees c.internal failure costs d.opportunity cost of the investment tied up in inventory e.spoilage of stored items f.costs of lost sales as a result of not having an item requested by a customer g.costs of incoming freight h.costs of matching invoices received to the items and the purchase orders i.costs of wages for work-in-process inspections j.costs that result from clerical errors

Answer the following questions using the information below: Computer Supplies is a distributor of DVDs.Music 4U is a local retail outlet which sells blank and recorded DVDs.Music 4U purchases DVDs from Computer Supplies at $0.25 per DVD;DVDs are shipped in packages of 100.Computer Supplies pays all incoming freight,and Music 4U does not inspect the DVDs due to Computer Supplies' reputation for high quality.Annual demand is 416 000 DVDs at a rate of 8000 DVDs per week.Music 4U earns 15% on its cash investments.The purchase-order lead time is one week.The following cost data are available: Relevant ordering costs per purchase order $\quad\quad\$ 94.50$ Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc, per year $\quad\$ 3.50$ -How many deliveries will be made during each time period?

Explain why backflush costing does not strictly adhere to generally accepted accounting principles and describe the types of businesses that might use backflush costing. _____________________________________________________________________________________________ _____________________________________________________________________________________________

All inventory costs are recorded in the financial accounting system.

Answer the following questions using the information below: Appleby Incorporated is a distributor of golf balls.Kel's Golf Supplies is a local retail outlet which sells golf balls.Kel's purchases the golf balls from Appleby Incorporated at $0.75 per ball;the golf balls are shipped in cartons of 72.Appleby Incorporated pays all incoming freight,and Kel's Golf Supplies does not inspect the balls due to Appleby' reputation for high quality.Annual demand is 172 800 golf balls at a rate of 3322 balls per week.Kel's Golf Supplies earns 12% on its cash investments.The purchase-order lead time is one week.The following cost data are available: Relevant ordering costs per purchase order $\quad\quad\quad\$ 125.00$ Carrying costs per carton per year: Relevant insurance, materials handling, breakage, etc,, per year $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\$ 0.77$ -Purchasing at the EOQ recommended level,what are the relevant total costs?

Answer the following questions using the information below: The following information applies to Dental Labs Plus,which supplies dental burs (used in dental drills)to dentists throughout Victoria.Dental Labs Plus purchases the dental burs from a manufacturer which has a reputation for very high quality in its manufacturing operation. Antual demand (weekly demand = 1/52 of annual demand) 31200 units Orders per year 25 Lead time in days 20 days Cost of placing an order \ 100 -What is the reorder point?

A system that has a single database that collects data and feeds it into software applications supporting all of a company's business activities is a(n):

The social and environmental performance of their suppliers is generally not considered relevant by their customers.

The manufacturing manager of New Technology Company is concerned about the company's newest plant.When the plant began operations three years ago,it had modern equipment,well-trained employees,engineered work and assembly stations,and a controlled environment.During the first two years,the evaluation results were very good with almost all cost variances being favourable.However,recently,things have turned negative. Now everything seems to be operating in a crisis management mode.Although most cost variances remain favourable,the plant's segment contribution is declining and customers are complaining about poor quality and slow delivery.Several customers have suggested that they may take their business elsewhere if things do not improve. The shop floor is in continual turmoil.In-process inventory is everywhere,production employees have difficulty finding jobs that need to be worked on,and scheduling has requested a larger computer to keep track of work-in-process. The sales manager does not know where to begin with solving the customers' problems.It seems that everyone is working very hard and the plant has the best facilities and trained employees in the industry. Required: What is the nature of the plant's problems? What recommendation would you make to help improve the situation? _____________________________________________________________________________________________ _____________________________________________________________________________________________