ABC company supplies parts to a major manufacturer for the production of Item I. The carrying amount of the inventory of parts at the end of the fiscal year 2020 is €2,000,000, which was considerably higher compared to the level of inventory of Item I in previous periods. During January 2021 the manufacturer terminated the production of Item I and started the production of Item II. The parts produced by ABC are not interchangeable between Item I and Item II. Moreover, Item I cannot be sold to another manufacturer. - Discuss whether ABC should write-down its inventory for the financial statements of 2020.

ABC company supplies parts to a major manufacturer for the production of Item I. The carrying amount of the inventory of parts at the end of the fiscal year 2020 is €2,000,000, which was considerably higher compared to the level of inventory of Item I in previous periods. During January 2021 the manufacturer terminated the production of Item I and started the production of Item II. The parts produced by ABC are not interchangeable between Item I and Item II. Moreover, Item I cannot be sold to another manufacturer. - Discuss whether ABC should write-down its inventory for the financial statements of 2020.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

ChapterC: Cases

Section: Chapter Questions

Problem 5.1SC: Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing...

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Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. How much would be Item X's total annual storage cost? A. Php 2,000,000 B. None of the above C. Php 8,485 D. Php 16,971 How much would be Item X's total annual stockout cost? A. None of the above B. Zero C. Php 8,485 D. Php 16,971
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. How much would be Item X's total annual procurement cost? * Php 16,971 Php 2,000,000 None of the above Php 8,485 How much would be Item X's total annual storage cost? * Php 8,485 Php 16,971 Php 2,000,000 None of the above How much would be Item X's total annual stockout cost? * Php 16,971 Zero None of the above Php 8,485
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. How much would be Item X's total annual procurement cost? A. None of the above B. Php 8,485 C. Php 16,971 D. Php 2,000,000
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. Including its total annual purchasing cost, how much would be Item X's total annual inventory cost? Php 2,008,485 Php 2,000,000 Php 2,016,971 None of the above What is Item X's average inventory level? 40 units 48 units 223 units None of the above
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. How much would be Item X's total annual stockout cost? A. None of the above B. Zero C. Php 8,485 D. Php 16,971
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. a. How much would be Item X's total annual storage cost? Php 8,485 Php 16,971 Php 2,000,000 None of the above b. How much would be Item X's total annual stockout cost? Zero Php 8,485 Php 16,971 None of the above c. Including its total annual purchasing cost, how much would be Item X's total annual inventory cost? Php 2,008,485 Php 2,000,000 Php 2,016,971 None of the above Please ANSWER ALL THE QUESTIONS above to avoid being rated as unhelpful. Thank you!
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. How many times per year would Item X be ordered?a. 21x b. 50x c. 40x d. None of the above Kindly provide computations. Thank you
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. How many units of Item X should be ordered each time? When should Item X be ordered? How much would be Item X's total annual purchasing cost? How much would be Item X's total annual procurement cost? Including its total annual purchasing cost, how much would be Item X's total annual inventory cost? What is Item X's average inventory level? How much would be Item X's total annual storage cost? How much would be Item X's total annual stockout cost? How many times per year would Item X be ordered?
Mr. Dan Stockman is the procurement manager for Slicker Image (SI), an upscale retailer of novelty products. It is mid-August, and Mr. Stockman is wondering how many units of a new multi-function smart bracelet to order for the upcoming holiday season (November and December). The Malaysian manufacturer of this item, TechToys, requires orders to be placed in late August for delivery in late October, in time for holiday sales. Based on past experience with similar products, Mr. Stockman believes that the holiday demand (Nov-Dec) for the bracelet is Normally distributed with a mean of 3,000 units and standard deviation of 900. TechToys sells the item to SI at a unit price of $ 145 per unit, and SI has decided to set the retail price at $ 200 during the regular selling season (Nov-Dec). At the end of December, SI will mark down the price by 50% (i.e., sell the item for $ 100) to sell off any left-over items. TechToys incurs a cost of $ 105 per unit to manufacture this bracelet. For…
Belletricity Inc., a medium electronic circuit board manufacturer in the US, is a long-term supplier to Morden Equipment (ME). ME is Belletricity’s only client. Every year, Belletricity sells around 5 million circuit boards to ME, which occupies Belletricity’s full production capacity. In 2012, ME informed Belletricity that due to business expansion, ME would increase the purchase from 5 million to 15 million starting from 2013. Belletricity has been selling circuit boards at the unit rate of USD 0.8 to ME so far. Due to the future increase of the buying volume, ME therefore asked Belletricity a price cut to USD 0.6 each. After negotiation, ME agreed to buy from Belletricity at the price of USD 1.00 starting 2013, for three years consecutively, till 2015. a) What was the rationale behind that ME agreed to pay a higher price to buy from Belletricity for the next three years? b) Why could Belletricity successfully persuade ME to accept her requested price?
Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost ofcapital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. Thecompany operates 360 days per year and Item X is received 9 days after placement of order. How many units of Item X should be ordered each time? A. 94 unitsB. 95 unitsC. 100 unitsD. 2,000 units