HORNGRENS COST ACCOUNTING W/ACCESS
16th Edition
ISBN: 9781323687604
Author: Datar
Publisher: PEARSON
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Chapter 20, Problem 20.36P
Supply-chain effects on total relevant inventory cost. Couture Jeans orders high-quality denim fabric from two different suppliers: Designer Fabrics and Cannon Cotton. Couture would like to use only one of the suppliers in the future. Due to variations in quality, Couture would need to inspect 20% of Designer’s 30-yard bolts (rolls) and 30% of Cannon’s. The following data refer to costs associated with the two suppliers.
| Designer | Cannon | |
| Number of orders per year | 50 | 50 |
| Annual bolts demanded | 2,000 | 2,000 |
| Price per bolt | $ 200 | $ 195 |
| Ordering cost per order | $ 150 | $ 200 |
| Inspection cost per bolt | $ 30 | $ 30 |
| Average inventory level | 20 | 20 |
| Expected number of stockouts | 10 | 10 |
| Stockout cost of rush order | $ 20 | $ 15 |
| Estimated number of jeans returned by customers because of defective fabric | 100 | 200 |
| Cost of fixing jeans returned by customers because of defective fabric | $ 25 | $ 25 |
| Opportunity cost of investment | 15% | 15% |
| Other carrying costs per bolt per year | $ 10 | $ 10 |
- 1. What is the relevant cost of purchasing from Designer Fabrics and Cannon Cotton?
Required
- 2. What factors other than cost should Couture Jeans consider?
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Supply-chain effects on total relevant inventory cost. Couture Jeans orders high-quality denim fabric from two different suppliers: Designer Fabrics and Cannon Cotton. Couture would like to use only one of the suppliers in the future. Due to variations in quality, Couture would need to inspect 20% of Designer’s 30-yard bolts (rolls) and 30% of Cannon’s. The following data refer to costs associated with the two suppliers.
Preparing variable and absorption costing income statements
This problem continues the Piedmont Computer Problem situation from Chapter 20. Piedmont Computer Company manufactures personal computers and tablets. Based on the latest information from the cost accountant, using the current sales mix, the weighted-average sales price per unit is $750 and the weighed-average variable cost per unit is $450. The company does not expect the sales mix to vary for the next year. Assume the beginning balance in Finished Goods Inventory is $0. Additional data for the first month of 2020:
Requirements
Compute the product cost per unit produced under absorption costing and under variable costing.
Prepare income statements for January 2020 using:
absorption costing.
variable costing.
3. Is operating income higher under absorption costing or variable costing in January? What causes the difference?
Effects of differing production levels on absorption costing income: Metrics to minimize inventory buildups. Mountain Press produces textbooks for high school accounting courses. The company recently hired a new editor, Jan Green, to handle production and sales of books for an introductory accounting course. Jan’s compensation depends on the gross margin associated with sales of this book. Jan needs to decide how many copies of the books to produce. The following information is available for the fall semester of 2017:
Chapter 20 Solutions
HORNGRENS COST ACCOUNTING W/ACCESS
Ch. 20 - Why do better decisions regarding the purchasing...Ch. 20 - Name six cost categories that are important in...Ch. 20 - What assumptions are made when using the simplest...Ch. 20 - Give examples of costs included in annual carrying...Ch. 20 - Give three examples of opportunity costs that...Ch. 20 - What are the steps in computing the cost of a...Ch. 20 - Why might goal-congruence issues arise when...Ch. 20 - JIT purchasing has many benefits but also some...Ch. 20 - What are three factors causing reductions in the...Ch. 20 - You should always choose the supplier who offers...
Ch. 20 - Prob. 20.11QCh. 20 - What are the main features of JIT production, and...Ch. 20 - Distinguish inventory-costing systems using...Ch. 20 - Describe three different versions of backflush...Ch. 20 - Discuss the differences between lean accounting...Ch. 20 - The order size associated with the...Ch. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Lyle Co. has only one product line. For that line,...Ch. 20 - Just-in-time inventory assumes all of the...Ch. 20 - Economic order quantity for retailer. Wonder Line...Ch. 20 - Economic order quantity, effect of parameter...Ch. 20 - EOQ for a retailer. The Fabric World sells fabrics...Ch. 20 - EOQ for manufacturer. Sk8 Company produces...Ch. 20 - Sensitivity of EOQ to changes in relevant ordering...Ch. 20 - JIT production, relevant benefits, relevant costs....Ch. 20 - Backflush costing and JIT production. Grand...Ch. 20 - Backflush costing, two trigger points, materials...Ch. 20 - Backflush costing, two trigger points, completion...Ch. 20 - Prob. 20.30PCh. 20 - Prob. 20.31PCh. 20 - Prob. 20.32PCh. 20 - Prob. 20.33PCh. 20 - JIT purchasing, relevant benefits, relevant costs....Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Backflush costing and JIT production. The Acton...Ch. 20 - Backflush, two trigger points, materials purchase...Ch. 20 - Backflush, two trigger points, completion of...Ch. 20 - Lean accounting. Reliable Security Devices (RSD)...Ch. 20 - JIT production, relevant benefits, relevant costs,...
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