1.
Material Requirement Planning (MRP) System:
The system that produces the finished goods with the help of raw material and semi finished goods is known as the material requirement planning. It involve the planning and controlling of inventory in such a way that the production will optimally generate.
Economic Order Quantity (EOQ):
Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.
Just-in-Time (JIT) Inventory:
Just in time inventory approach means to purchase the inventory when it is needed. This approach does not consider the storage of inventory factor. Most of the companies use this approach to avoid the wastage arises due to extra inventory. When the need of inventory arises the purchase manager will purchase the inventory from supplier.
To compute: The actual cost of producing and carrying units in inventory using MRP system.
2.
The optimum batch size and number of batches also calculate the annual cost of producing and carrying if the company uses optimal batch size. Compare this cost with the cost calculated in part1.
3.
To compute: The actual cost of producing and carrying units in inventory using JIT system.
4.
To explain: The MRP system and JIT system and there advantages and disadvantages.
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COST ACCOUNTING
- Tech Works Corp. produces J-Pods, music players that can download thousands of songs. Tech Works forecasts that demand in 2017 will be 48,000 J-Pods. The variable production cost of each J-Pod is $54. In its MRP system, due to the large $10,000 cost per setup, Tech Works plans to produce J-Pods once a month in batches of 4,000 each. The carrying cost of a unit in inventory is $17 per year. Q. A new manager at Tech Works has suggested that the company use the EOQ model to determine the optimal batch size to produce. (To use the EOQ model, Tech Works needs to treat the setup cost in the same way it would treat ordering cost in a traditional EOQ model.) Determine the optimal batch size and number of batches. Round up the number of batches to the nearest whole number. What would be the annual cost of producing and carrying J-Pods in inventory if it uses the optimal batch size?arrow_forwardRelling Corporation manufactures a drink bottle, model CL24. During 2017, Relling produced 210,000 bottles at a total cost of $808,500. Kraff Corporation has offered to supply as many bottles as Relling wants at a cost of $3.75 per bottle. Relling anticipates needing 225,000 bottles each year for the next few years. Q. What other information would you need to be confident that the equation in requirement 2 accurately predicts the cost of manufacturing drink bottles?arrow_forwardRelling Corporation manufactures a drink bottle, model CL24. During 2017, Relling produced 210,000 bottles at a total cost of $808,500. Kraff Corporation has offered to supply as many bottles as Relling wants at a cost of $3.75 per bottle. Relling anticipates needing 225,000 bottles each year for the next few years. Q. What is the average cost of manufacturing a drink bottle in 2017? How does it compare to Kraff’s offer?arrow_forward
- Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company’s Marketing Department estimates that demand for the new toy will range between 10,000 units and 35,000 units per month. The new toy will sell for $9.00 per unit. Enough capacity exists in the company’s plant to produce 15,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $5.00 , and incremental fixed expenses associated with the toy would total $32,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $29,000 per month for any production volume up to 15,000 units. For a production volume between 15,001 and 35,000 units the fixed fee would increase to a total of $58,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. (Do not round your intermediate calculations.)…arrow_forwardNeptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that demand for the new toy will range between 15,000 units and 35,000 units per month. The new toy will sell for $3 per unit. Enough capacity exists in the company's plant to produce 18,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.00, and incremental fixed expenses associated with the toy would total $22,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $1.75 per unit plus a fixed fee of $15,000 per month for any production volume up to 20,000 units. For a production volume between 20,001 and 40,000 units the fixed fee would increase to a total of $30,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. 2. How much profit will Neptune earn assuming: a. It…arrow_forwardTechno Gadgets Corp. produces J-Pods, music players that can download thousands of songs. Techno Gadgets forecasts that demand in 2020 will be 19,800 J-Pods. The variable production cost of each J-Pod is $55. In its MRP system, due to the large $17,600 cost per setup, Techno Gadgets plans to produce J-Pods once a month in batches of 1,650 units. The carrying cost of a unit in inventory is $16 per year. Read the requirements LOADING... . Question content area bottom Part 1 Requirement 1. Using the MRP system, what is the annual cost of producing and carrying J-Pods in inventory? (Assume that, on average, half of the units produced in a month are in inventory.) Begin by determining the formula, then calculate the annual cost of producing and carrying J-Pods in inventory, using an MRP system. (Round your answer to the nearest whole dollar.) Cost of producing Total variable production cost + Total setup cost…arrow_forward
- Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company’s Marketing Department estimates that demand for the new toy will range between 20,000 units and 35,000 units per month. The new toy will sell for $9.00 per unit. Enough capacity exists in the company’s plant to produce 25,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $5.00 , and incremental fixed expenses associated with the toy would total $30,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $71,000 per month for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee would increase to a total of $142,000 per month. 4. Assume that Neptune plans to use all of its production capacity to produce the first 25,000 units that it sells and that it also commits to hiring the outside…arrow_forwardNeptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company’s Marketing Department estimates that demand for the new toy will range between 20,000 units and 30,000 units per month. The new toy will sell for $10.00 per unit. Enough capacity exists in the company’s plant to produce 25,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $6.00 , and incremental fixed expenses associated with the toy would total $32,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $5.00 per unit plus a fixed fee of $69,000 per month for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee would increase to a total of $138,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. 2. How much profit with Neptune earn…arrow_forwardNeptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company’s Marketing Department estimates that demand for the new toy will range between 20,000 units and 30,000 units per month. The new toy will sell for $9.00 per unit. Enough capacity exists in the company’s plant to produce 25,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $5.00 , and incremental fixed expenses associated with the toy would total $32,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $4.00 per unit plus a fixed fee of $69,000 per month for any production volume up to 25,000 units. For a production volume between 25,001 and 55,000 units the fixed fee would increase to a total of $138,000 per month. Required: Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. Note: Do not round your intermediate calculations.…arrow_forward
- Relling Corporation manufactures a drink bottle, model CL24. During 2017, Relling produced 210,000 bottles at a total cost of $808,500. Kraff Corporation has offered to supply as many bottles as Relling wants at a cost of $3.75 per bottle. Relling anticipates needing 225,000 bottles each year for the next few years. Q. Can Relling use the answer in requirement 1a to determine the cost of manufacturing 225,000 drink bottles? Explain.arrow_forwardThe Sandstone Corporation uses an injection molding machine to make a plastic product, Z35, after receiving firm orders from its customers. Sandstone estimates that it will receive 60 orders for Z35 during the coming year. Each order of Z35 will take 100 hours of machine time. The annual machine capacity is 8,000 hours. Q. Sandstone is considering introducing a new product, Y21. The company expects it will receive 30 orders of Y21 in the coming year. Each order of Y21 will take 40 hours of machine time. Assuming the demand for Z35 will not be affected by the introduction of Y21, calculate (a) the average waiting time for an order received and (b) the average manufacturing cycle time per order for each product, if Sandstone introduces Y21.arrow_forwardRelling Corporation manufactures a drink bottle, model CL24. During 2017, Relling produced 210,000 bottles at a total cost of $808,500. Kraff Corporation has offered to supply as many bottles as Relling wants at a cost of $3.75 per bottle. Relling anticipates needing 225,000 bottles each year for the next few years. Q. Relling’s cost analyst uses annual data from past years to estimate the following regression equation with total manufacturing costs of the drink bottle as the dependent variable and drink bottles produced as the independent variable:y = $445,000 + $1.75XDuring the years used to estimate the regression equation, the production of bottles varied from 200,000 to 235,000. Using this equation, estimate how much it would cost Relling to manufacture 225,000 drink bottles. How much more or less costly is it to manufacture the bottles than to acquire them from Kraff?arrow_forward
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