Newstar Foods is a company manufacturing cereal. It has an annual demand for two flavors:Strawberry cereal and Blueberry cereal of 592,600 and 608,030 boxes respectively. Each boxcontains 18 ounces of cereal, and exactly half of the weight of the cereal comes from its fruit(strawberry or blueberry), and both fruits are imported from Japan. Newstar Foods has computedits ordering cost as US$60 per order. They pay their Japanese supplier 12.5 US cents per pound(there are 16 ounces in a pound) of strawberry and 10 cents per pound of blueberry, The annualholding cost of elther fruit is 20% of the value of the fruit.Answer the following questions based on the data above. Choose the closest number if needed.For the EOQ policy, the total annual stocking cost (the sum of the holding and ordering costs) forstrawberry is$750$1.000$850$613O $900

Inventory management is the process of planning, monitoring, and controlling the movement of…

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Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
Kaune Food Products Company manufactures canned mixed nuts with an average manufacturing cost of 52 per case (a case contains 24 cans of nuts). Kaune sold 150,000 cases last year to the following three classes of customer: The supermarkets require special labeling on each can costing 0.04 per can. They order through electronic data interchange (EDI), which costs Kaune about 61,000 annually in operating expenses and depreciation. Kaune delivers the nuts to the stores and stocks them on the shelves. This distribution costs 45,000 per year. The small grocers order in smaller lots that require special picking and packing in the factory; the special handling adds 25 to the cost of each case sold. Sales commissions to the independent jobbers who sell Kaune products to the grocers average 8 percent of sales. Bad debts expense amounts to 9 percent of sales. Convenience stores also require special handling that costs 30 per case. In addition, Kaune is required to co-pay advertising costs with the convenience stores at a cost of 15,000 per year. Frequent stops are made to each convenience store by Kaune delivery trucks at a cost of 30,000 per year. Required: 1. Calculate the total cost per case for each of the three customer classes. (Round unit costs to four significant digits.) 2. Using the costs from Requirement 1, calculate the profit per case per customer class. Does the cost analysis support the charging of different prices? Why or why not? 3. What if Kaune charged the average price per case to all customer classes? How would that affect the profit percentages?
Bostick Company is a distributor of air filters to retail stores. It buys its filters from several manufacturers. Filters are ordered in lot sizes of 1,000, and each order costs ₱4,000 to place. Demand from retails stores is 20,000 filters per month, and carrying costs is ₱10 a filter per month. What is the optimal order quantity with respect to so many lot sizes? What would be the optimal order quantity if the carrying cost were cut in half to ₱5 a filter per month? What would be the optimal order quantity if ordering costs were reduced to ₱1,500 per order?
Tom Industries has a plant capacity of 70,000 units per month. The company is currently operating at 80% of capacity, resulting in a variable cost per unit of $30 and a fixed cost per unit of $4.10. The regular sales price of Tom's product is $45 per unit. Tom Industries has been asked by Izzy, Inc. to fill a special order for 10,000 units of the product at a special sales price of $40 each. Izzy will market the units in a foreign country under its own brand name. As a result, Tom Industries will have to pay an export attorney a fee of $15,000 to make sure it is complying with export laws and regulations relating to the special order. Additionally, the variable cost per unit will decrease by $5 since sales commissions will not be paid on the special order. You have asked a staff member to calculate the effect on operating income if the special order is accepted. They calculated that the increase in operating income as a result of accepting the special order if…
Morning Glory buys cereal directly from the manufacturer for $20 per case. The company’s annual demand for cereal is 200,000 cases and the company believes that the demand is constant for each of the 250 days per year that it is open for business. Average lead time from the supplier for new orders is a constant 8 days. The purchasing agent at Morning Glory estimates the annual inventory carrying cost is 10% and it costs approximately $40 to prepare, send, and receive an order. Morning Glory discovered if it orders 10,000+ cases each time, it can obtain a $2 price break per case from the supplier. What order quantity should Morning Glory place based on this information?
Bulldogs Inc. expects to use 48,000 boxes of chocolate per year costing P12 per box. Inventory carrying cost is equal to 20% of the purchase price. The company uses its inventory at a constant rate. The lead time for placing the order is 3 days, and Bulldogs Co. holds 2,400 boxes of paint as safety stock. If the company orders 2,000 boxes of chocolate per order, what is the cost of carrying inventory? Bulldogs Inc. currently fills mail orders from all over the country and receipts were received in its head office. The company’s average accounts receivable is P3,125,000 and is financed by a bank loan with 10% interest. Bulldogs is considering a regional lockbox system to speed up collections. This system is projected to reduce the average accounts receivable by 15%. The annual cost of the lockbox system is P25,000. What is the estimated net annual savings in implementing the lockbox system?
Country Jeans Co. has an annual plant capacity of 65,600 units, and current production is 46,300 units. Monthly fixed costs are $41,400, and variable costs are $25 per unit. The present selling price is $34 per unit. On November 12 of the current year, the company received an offer from Miller Company for 16,100 units of the product at $26 each. Miller Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Country Jeans Co. Question Content Area a. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Miller order. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential AnalysisReject Order (Alt. 1) or Accept Order (Alt. 2)November 12 RejectOrder(Alternative 1) AcceptOrder(Alternative 2)…
Gooby Gummies makes taffy candy, which it sells at local supermarkets. The fixed monthly cost to produce the candy is $4,000. The main ingredient for the candy, glucose syrup costs $0.21 per pound. Gooby Gummies sells the taffy for $0.75 per pound to supermarkets. The management of Gooby Gummies is thinking of raising the price of the taffy candy to $0.95 per pound. Currently, the company produces and sells 9,000 pounds of taffy candy a month. The management realizes that if they raise the price, the sales will go down to 5,700 pounds per month. By how much will the company's profit per year be affected if Gooby Gummies' management decide to raise the price? Should the company raise its price? Explain your answer.
Gooby Gummies makes taffy candy, which it sells at local supermarkets. The fixed monthly cost to produce the candy is $4,000. The main ingredient for the candy, glucose syrup costs $0.21 per pound. Gooby Gummies sells the taffy for $0.75 per pound to supermarkets.The management of Gooby Gummies is thinking of raising the price of the taffy candy to $0.95 per pound. Currently, the company produces and sells 9,000 pounds of taffy candy a month. The management realizes that if they raise the price, the sales will go down to 5,700 pounds per month. By how much will the company's profit per year be affected if Gooby Gummies' management decide to raise the price? Should the company raise its price? Explain your answer.
Western Jeans Co. has an annual plant capacity of 2,000,000 units, and current production is 1,920,000 units. Monthly fixed costs are $400,000, and variable costs are $9 per unit. The present selling price is $15 per unit. On July 6 of the current year, the company received an offer from Childs Company for 50,000 units of the product at $13 each. Childs Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Western Jeans Co. Question Content Area a. Prepare a differential analysis dated July 6 on whether to reject (Alternative 1) or accept (Alternative 2) the Childs order. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisReject (Alt. 1) or Accept (Alt. 2) OrderJuly 6 Line Item Description Reject Order(Alternative 1) Accept Order(Alternative 2) Differential Effects(Alternative 2) Revenues $Revenues…
As a boba manufacturer company, Ngeboba supplies boba to Gula Hula and BobaTime. Ngeboba supplies 100 kgs to Gula Hula per month and also 500 kgs to Boba Time per month. Ngeboba as one of the founders of Gula Hula and BobaTime, felt responsible for the supply of boba for both brands. Ngeboba itself has a product cost of IDR 10,000 per kilo. Ngeboba sells to other customers than Gula Hula and BobaTime for IDR 20,000 per kilogram. Gula Hula gets prices from other suppliers at IDR 17,000 per kilogram, while BobaTime gets 2,000 cheaper prices per kilogram than the price obtained by Gula Hula because it buys more. In general, Ngeboba's production capacity is 2 (two) tons per month. During the 3rd quarter, Ngeboba felt that his sales had risen drastically, so Ngeboba was faced with the following conditions: Demand from customers is full up to 2 (two) tons in July because it is the dry season. With Ngeboba, they felt that they couldn't help but they need to supply Gula Hula and BobaTime. In…
As a boba manufacturer company, Ngeboba supplies boba to Gula Hula and BobaTime. Ngeboba supplies 100 kgs to Gula Hula per month and also 500 kgs to Boba Time per month. Ngeboba as one of the founders of Gula Hula and BobaTime, felt responsible for the supply of boba for both brands. Ngeboba itself has a product cost of IDR 10,000 per kilo. Ngeboba sells to other customers than Gula Hula and BobaTime for IDR 20,000 per kilogram. GulaHula gets prices from other suppliers at IDR 17,000 per kilogram, while BobaTime gets 2,000 cheaper prices per kilogram than the price obtained by Gula Hula because it buys more.In general, Ngeboba's production capacity is 2 (two) tons per month. During the 3rd quarter,Ngeboba felt that his sales had risen drastically, so Ngeboba was faced with the following conditions: Demand from customers is full up to 2 (two) tons in July because it is the dry season. With Ngeboba, they felt that they couldn't help but they need to supply Gula Hula and BobaTime. In…