Accounting Information Systems
9th Edition
ISBN: 9781133934400
Author: James A. Hall
Publisher: Cengage Learning
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Chapter 7, Problem 2P
a.
To determine
Determine the economic order quantity for Company O.
b.
To determine
Determine the reorder point for Company O.
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Out Camping is a manufacturer of supplies and has several divisions, one of which is the tent division that produces the deluxe tent Away From Home. Fourteen thousand of these tents are made each year. This model of tent incorporates two zipping doors in each model.Zippers for these doors are purchased from Zippy Zippers. Out Camping began this year with 500 zippers in inventory, but is now adopting an economic order quantity approach to inventory. A review of last year’s records reveals the following information concerning each order placed with Zippy Zippers: variable labor— $12; variable supplies—$1; fixed computer costs—$4; fixed office expenses—$2; fixed mailing expenses— $2; and fixed supplies—$1. No differences are expected this year. Last year, the cost of carrying one zipper in inventory for the entire year was $1, but Out Camping has recently negotiated a new lease on its warehouse, and the cost of carrying each zipper is now expected to increase by 25 cents. Out Camping also…
Required Information
[The following information applies to the questions displayed below.]
Iguana, Incorporated, manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear
feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor
rate averages $13 per hour. Iguana has the following inventory policies:
• Ending finished goods inventory should be 40 percent of next month's sales.
. Ending direct materials inventory should be 30 percent of next month's production.
Expected unit sales (frames) for the upcoming months follow:
March
April
May
June
July
August
365
430
480
Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing
overhead is estimated to be $4,800 ($400 per month) for expected production of 4,000 units for the year.
Selling and administrative expenses are estimated at $450 per month plus $0.50 per unit sold.
580
555
605
Iguana, Incorporated, had…
Required information
[The following information applies to the questions displayed below]
Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo,
which costs $2.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $14 per hour.
Iguana has the following inventory policies:
.Ending finished goods inventory should be 40 percent of next month's sales.
.Ending direct materials inventory should be 30 percent of next month's production.
Expected unit sales (frames) for the upcoming months follow:
March
April
May
June
July
August
Variable manufacturing overhead is incurred at a rate of $0.40 per unit produced. Annual fixed manufacturing overhead is
estimated to be $10,800 ($900 per month) for expected production of 4,000 units for the year. Selling and administrative
expenses are estimated at $950 per month plus 50.60 per unit sold.
Iguana, Inc., had $11,900 cash on hand on April 1. Of its…
Chapter 7 Solutions
Accounting Information Systems
Ch. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Distinguish between continuous, batch, and...Ch. 7 - Prob. 4RQCh. 7 - What are the primary determinants for both...Ch. 7 - What are the objectives of inventory control in...Ch. 7 - Prob. 7RQCh. 7 - What documents are needed for cost accounting...Ch. 7 - What types of management reports are prepared by...Ch. 7 - What document signals the completion of the...
Ch. 7 - Prob. 11RQCh. 7 - Prob. 12RQCh. 7 - Prob. 13RQCh. 7 - What is meant by the statement Inventories...Ch. 7 - What are the primary goals of lean manufacturing?Ch. 7 - Distinguish between activities and cost objects in...Ch. 7 - Differentiate between essential and nonessential...Ch. 7 - Prob. 18RQCh. 7 - Define computer-integrated manufacturing.Ch. 7 - Prob. 20RQCh. 7 - Discuss the importance of the move ticket to the...Ch. 7 - How realistic are the assumptions of the economic...Ch. 7 - Explain why the economic order quantity is the...Ch. 7 - Supervisors in the work centers oversee the usage...Ch. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - How does automation help achieve manufacturing...Ch. 7 - Prob. 9DQCh. 7 - How can poor quality be expensive to the firm,...Ch. 7 - Discuss how an emphasis on financial performance...Ch. 7 - Prob. 12DQCh. 7 - How are cost structures fundamentally different...Ch. 7 - Prob. 14DQCh. 7 - Prob. 15DQCh. 7 - Discuss the advantages of activity-based costing.Ch. 7 - Discuss the disadvantages of activity-based...Ch. 7 - Explain why traditional cost allocation methods...Ch. 7 - Explain the concept of a product family and its...Ch. 7 - Explain the relationship between MRP II and ERP.Ch. 7 - Prob. 1MCQCh. 7 - Which of the following statements regarding...Ch. 7 - Refer to the equation for the EOQ in the text. Car...Ch. 7 - Prob. 4MCQCh. 7 - Prob. 5MCQCh. 7 - Prob. 6MCQCh. 7 - Which of the following is NOT a problem associated...Ch. 7 - Which of the following is NOT a principle of lean...Ch. 7 - Prob. 9MCQCh. 7 - Prob. 10MCQCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - ZERO DEFECTS PROCESS Northern Tractor is a...Ch. 7 - ACTIVITY DRIVERS Cut It Up, Inc., is a...Ch. 7 - LEAN MANUFACTURING PRINCIPLES Write an essay...Ch. 7 - Prob. 1ICCCh. 7 - Prob. 2ICCCh. 7 - Prob. 3ICCCh. 7 - Prob. 4ICCCh. 7 - Prob. 5ICC
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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?arrow_forwardRequired Information [The following information applies to the questions displayed below.] Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $15 per hour. Iguana has the following inventory policies: • Ending finished goods inventory should be 40 percent of next month's sales. • Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: March April May June July August 375 450 500 680 575 625 Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $6,000 ($500 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $550 per month plus $0.70 per unit sold. Iguana, Incorporated, had…arrow_forwardRequired information [The following information applies to the questions displayed below.] Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month's sales. • Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: March April May June July August 320 340 390 490 465 515 Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold. Iguana, Incorporated, had…arrow_forward
- Required information [The following information applies to the questions displayed below.] Iguana, Incorporated, manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 per hour. Iguana has the following inventory policies: ⚫ Ending finished goods inventory should be 40 percent of next month's sales. • Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: March April May June July August 310 320 370 470 445 495 Variable manufacturing overhead is incurred at a rate of $0.50 per unit produced. Annual fixed manufacturing overhead is estimated to be $4,800 ($400 per month) for expected production of 4,800 units for the year. Selling and administrative expenses are estimated at $500 per month plus $0.50 per unit sold. Iguana, Incorporated, had…arrow_forwardRequired information [The following information applies to the questions displayed below.] Iguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month's sales. Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: March 365 April Мay 430 480 June 580 July August 555 605 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $4,800 ($400 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $450 per month plus $0.50 per unit sold. Iguana, Inc., had $11,000 cash on hand…arrow_forwardRequired information [The following information applies to the questions displayed below.]Iguana, Inc., manufactures bamboo picture frames that sell for $30 each. Each frame requires 4 linear feet of bamboo, which costs $2.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $14 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month’s sales. Ending direct materials inventory should be 30 percent of next month’s production. Expected unit sales (frames) for the upcoming months follow: March 295 April 290 May 340 June 440 July 415 August 465 Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,000 ($750 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $800 per month plus $0.50 per unit sold. Iguana,…arrow_forward
- Bond carries a part that is popular in the manufacture of automatic sprayers. Demand for this part is 4,000 units per year; order costs amount to P30 per order, and holding costs total P1.50 per unit. Bond currently places four orders per year with its suppliers. Management is considering the implementation of an economic order quantity model in an effort to better manage its inventories. Compute total annual inventory costs if Bond follows the EOQ policy.arrow_forward8.. If the cost to place one order increased by P 10 and the cost to carry one Material A in stock remains the same, the economic order quantity will be 600 units а. b. 447 units с. 425 units d. 500 unitsarrow_forwardItranscript Required information [The following information applies to the questions displayed below) Iguana, Incorporated, manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $1.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 per hour. Iguana has the following inventory policies Ending finished goods inventory should be 40 percent of next month's sales. Ending direct materials inventory should be 30 percent of next month's production. Expected unit sales (frames) for the upcoming months follow: . March April May June July August Skip to question 325 350 400 5:00 475 525 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $6.000 ($500 per month) for expected production of 5,000 units for the year. Selling and administrative expenses are estimated at $550 per month plus $0.60 per unit sold.…arrow_forward
- Rugged Outfitters purchases one model of mountain bike at a wholesale cost of $520 per unit and resells it to end consumers. The annual demand for the company’s product is 49,000 units. Ordering costs are $500 per order and carrying costs are $100 per bike per year, including $40 in the opportunity cost of holding inventory. Q. Assume that when evaluating the manager, the company excludes the opportunity cost of carrying inventory. If the manager makes the EOQ decision excluding the opportunity cost of carrying inventory, the relevant carrying cost would be $60, not $100. How would this affect the EOQ amount and the actual annual relevant cost of ordering and carrying inventory?arrow_forwardRequired information [The following information applies to the questions displayed below.] Shadee Corporation expects to sell 600 sun shades in May and 800 in June. Each shade sells for $180. Shadee's beginning and ending finished goods inventories for May are 75 and 50 shades, respectively. Ending finished goods Inventory for June will be 60 shades. Each shade requires a total of $40 in direct materials that includes 4 adjustable poles that cost $5.00 each. Shadee expects to have 120 poles in direct materials inventory on May 1, 80 poles in inventory on May 31, and 100 poles in inventory on June 30. Suppose that each shade takes three direct labor hour to produce and Shadee pays its workers $9 per hour. Additionally, Shadee's fixed manufacturing overhead is $10,000 per month, and variable manufacturing overhead is $13 per unit produced. Additional information: . Selling costs are expected to be 6 percent of sales. • Fixed administrative expenses per month total $12,000. Required:…arrow_forwardCheeseburger and Taco Company purchases 19,634 boxes of cheese each year. It costs $21 to place and ship each order and $3.74 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is the annual ordering cost of cheese inventory. Round the answer to two decimals. Your Answer: Answerarrow_forward
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