Mat 540 Final Report

In the absence of any data from the case regarding the accounts receivable and accounts payable, the analyses has assumed that inventory is the only constituent of the working capital. Therefore, in calculating the change in working capital figures, only the incremental inventory (TABLE 21) is considered.

330-10-30330-10-30-1 The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location. It is understood to mean acquisition and production cost, and its determination involves many considerations. 330-10-30330-10-30-2 Although principles for the determination of inventory costs may be easily stated, their application, particularly to such inventory items as work in process and finished goods, is difficult because of the variety of considerations in the allocation of costs and charges.

In this final paper for Managerial Finance I will attempt to show how the supply chain inventory management method can be affected depending on the situation of the retailer. Studying the control method for problems in inventory, which would include both, excesses in inventory as well as shortages, and hoping to minimize loss.

In the current situation, the order is set to every Monday which means a total number of 50 orders for the whole period, and the average Inventory calculated from the given data is 5 units. Therefore, total cost of the current situation calculation will be as follows:

Abby Conroy was tasked with calculating an effective quote for Breeland Ltd., she chose the activity based accounting costing system since it more accurately captures the related costs. A special order was placed by Breeland Ltd. with Ace Fertilizer Company. The did not plan to order more of this product in the future. Based on Ace’s policy, the special order included disposal costs for any used materials in the event no other orders existed for the unused materials at the time the Breeland contract was signed. Abby correctly calculated the total direct material and labor costs and accurately arrived at the indirect costs using the ABC method and used cost activity pools that make sense for the company and

a. Calculate/show the Inventory Turnover and the Days Inventory Held ratios for each quarter. How do these change during the 10-year period? What does this mean?

a. Assuming the most current operational cost levels, what sales must it generate to recoup the above investment?

From week 17 to week 25 the purchase orders are decreasing concomitant with the increase of customer’s orders, and this will have negative consequence on the inventory. The stock is decreasing rapidly, and thus, by the end of week 44 the Retailer cannot fulfil customer’s orders.

There are two systems in inventory management: push system and pull system. Push system based on stock, this system forecast the market requirement, it has a large batch size and a very high inventory. This system has a overproduction problem. Pull system depends on customer order. This system has a small batch sizes. In this system, produce depends on needed. This system has few inventories.

• Stock Sy at the end of period y is dependent on lot size Lxy selected at period y, stock Sy−1 at the end of period y−1 and the demand of the item Dy at the time period y.

| (TCO F) Assume there is no beginning work in process inventory and the ending work in process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is:

Thus, holding cost is a variable relevant to achieve the objective of the project; therefore, it must be measured as close to the reality. In this proposal, the article considered the cost of carrying as the sum of the cost of the physical space occupied by the inventory including depreciation, insurance, utility costs, taxes, rent, cost of handling the items. It was disregarding the obsolescence because the paper considers an inventory system with non-instantaneous deteriorating item.

Based on the demand information exchanged by the customer, decisions about order quantities and timing of inventory replenishment are made .

In many cases, the capital outlays can occur not only at the beginning of the first year of the project but at other times later during the project’s progress as well. For example, an upgrade to the plant and machinery may occur in a later year. In such cases the present value of those capital outlays need to be calculated by discounting the future capital outlays and then the present value of the total capital outlays need to be subtracted from

This method ensures that all sustained costs are recuperated from the selling price of a good price. This method is also known as ‘full absorption costing’. The three steps required to complete a periodic assessment of costs produced to good is to: Assign costs to cost pools. This consists of a standard set of accounts that are always included in the cost pools and they should not be changed. The second step is to calculate the usage and this can be done as there needs to be a checking of the usage of whatever activity measure is used to allot overhead costs such as machine hours or direct labour hours used. The final step would be to assign the costs. In order to do this, first divide the usage measure into the total costs in the cost pools to conclude at the allocation rate per unit of activity, and assign overhead costs to produced goods based on this usage rate.