Exam 20: Inventory Management, just-In-Time, and Simplified Costing Methods

The costs of storage space owned are always relevant costs of carrying inventory.

Stockout costs arise when an organization experiences an ability to deliver its goods to its customers.

The management accountant aids in MRP by ________.

Ralph was in the process of completing the quarterly planning for the purchasing department when a major computer malfunction lost most of his data.For direct material XXX he was able to recover the following: Ralph purchases at the EOQ quantity level. Required: Determine the annual demand,the cost of placing an order,the annual carrying cost of one unit,and the economic order quantity.

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

The Controller of Nip-it-in-the-Bud Inc.has studied the possibility of implementing a JIT production system.The annual incremental retooling costs of the JIT system is projected to be about $67,000 however,the new system will lower insurance costs by $10,000 and storage costs will drop by $20,000 a year as the company will be able to reuse warehouse space for other strategic purposes.In addition,material handling costs will drop by $10,000 a year and because of a resulting increase in quality and faster delivery,the company's contribution margin on the product will increase by $2.00 on annual sales of 20,000 units. Required: Calculate the net incremental benefit of the JIT system implementation.

The optimal safety-stock level is the quantity of safety stock that minimizes the sum of annual relevant stockout and ordering costs.

Globe Inc.is a distributor of DVDs.DVD Mart is a local retail outlet which sells blank and recorded DVDs.DVD Mart purchases DVDs from Globe at $29.00 per DVD;DVDs are shipped in packages of 70.Globe pays all incoming freight,and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality.Annual demand is 320,000 DVDs at a rate of 6500 DVDs per week.DVD Mart earns 13% on its cash investments.The purchase-order lead time is one week.The following cost data are available: What is the economic order quantity?

Which of the following statements best defines a materials requirements planning system?

What are five features of a just-in-time manufacturing system?

Increases in the carrying cost and decreases in the ordering cost per purchase order result in ________.

Tornado Electronics manufactures stereos.All processing is initiated when an order is received.For April there were no beginning inventories.Conversion Costs and Direct Materials are the only manufacturing cost accounts.Direct Materials are purchased under a just-in-time system.Backflush costing is used with a finished goods trigger point.Additional information is as follows: Required: Record all journal entries for the monthly activities related to the above transactions if backflush costing is used.

Short Grass Incorporated is a distributor of golf balls.Martin's Golf Supplies is a local retail outlet which sells golf balls.Martin's purchases the golf balls from Short Grass Incorporated at $1.15 per ball;the golf balls are shipped in cartons of 52.Short Grass Incorporated pays all incoming freight,and Martin's Golf Supplies does not inspect the balls due to Short Grass' reputation for high quality.Annual demand is 157,520 golf balls at a rate of 3291 balls per week.Martin's Golf Supplies earns 12% on its cash investments.The purchase-order lead time is one week.The following cost data are available: Purchasing at the EOQ recommended level,how many deliveries will be made during each time period? (Round costs to the nearest cent and quantities to the nearest whole number. )

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 the best of everything.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 favorable.However,recently,things have turned negative. In recent months,everything seems to be operating in a crisis management mode.Although most cost variances remain favorable,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 vice president of sales 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?

The EOQ model is solved using calculus but the key intuition is that relevant total costs are minimized when relevant ordering costs equal relevant carrying costs.

JIT purchasing and production systems can be used in service industries as supplies and the labor to manage those supplies can be a significant cost element in some service organizations.

Which of the following statements best defines a just-in-time production system?

Discuss considerations that should be fully taken into account when developing inventory related relevant costs for use in an economic order quantity (EOQ)model.

Lean accounting is much simpler than traditional product costing because ________.

Picture Company has one particular product that has an annual demand of 5,000 units.Total manufacturing costs per unit total $50.Ordering costs for the product total $60 per purchase order.Currently,the carrying costs per unit are 25% of manufacturing costs. Required: Determine the economic manufacturing order quantity.