Ross White's machine shop uses 2500 brackets during the course of a year, and this usage is relativelyconstant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost perbracket per year is $1.50 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year. a) i) What is Ross White's optimal order quantity? ii) What is the company's total annual cost of inventory?

Ross White's machine shop uses 2500 brackets during the course of a year, and this usage is relativelyconstant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost perbracket per year is $1.50 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year. a) i) What is Ross White's optimal order quantity? ii) What is the company's total annual cost of inventory?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 54P

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Ross White's machine shop uses 2500 brackets during the course of a year, and this usage is relativelyconstant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost perbracket per year is $1.50 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year. Upon hearing that Ross White is considering the producing the brackets in-house, the supplier has notified Ross that the purchase price would drop from $15 per bracket to $14.50 per bracket if Ross purchasethe brackets in lots of 1000. i) What is the total annual cost of inventory if Ross buys the brackets in lots of 1000 at $14.50 each? ii) Given the options of purchasing the brackets at $15 each, producing them in-house at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?
Danford Company, a manufacturer of farm equipment, currently produces 20,000 units of gas filters per year for use in its lawn-mower production. The costs, based on the previous year's production, are reported below. It is anticipated that gas-filter production will last five years. If the company continues to produce the product in-house, annual direct material costs will increase $3000/year (For example, annual material costs during the first production year will be $63,000.) Direct labor will also increase by $5000/year. However, variable overhead costs will increase at the rate of $2000/year and the fixed overhead will remain at its current level over the next five years. John Holland Company has offered to sell Danford 20,000 units of gas filters for $25 per unit. If Danford accepts the offer, some of the manufacturing facilities currently used to manufacture the filter could be rented to a third party for $35,000 per year. The firm's interest rate is known to be 15%. What is the…
Ross White's machine shop uses 2,500 brackets during the course of a year, and this usage is relatively constant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost per bracket per year is $1.50 (or 10% of the unit cost) and the ordering cost per order is $18.75. There are 250 working days per year.Required:(a). What is the EOQ?( b.) Given the EOQ, what is the average inventory? What is the annual inventory holding costs?( c). In minimizing cost, how many orders would be made each year? What would be the annual ordering cost?( d). Given the EOQ, what is the total annual inventory cost, including purchase cost?( e). What is the time between orders?( f). What is the reorder point, ROP?
Radovilsky Manufacturing Company, in Hayward,California, makes flashing lights for toys. The company operatesits production facility 300 days per year. It has orders for about12,000 flashing lights per year and has the capability of producing100 per day. Setting up the light production costs $50. The cost ofeach light is $1. The holding cost is $0.10 per light per year.What is the total cost per year, including the cost of thelights?
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Santa Fe Company, a farm-equipment manufacturer, currently produces 20,000 units of gas filters for use in its lawnmower production annually. The following costs are reported according to the previous year's production: It is anticipated that gas-filter production will last five years. If the company continues to produce the product in-house, annual direct-material costs will increase at a rate of 5%. (For example, the annual direct-material costs during the first production year will be $63,000.) In addition, direct-labor costs will increase at a rate of 6% per year, and variable-overhead costs will increase at a rate of 3% while fixed-overhead costs will remain at the current level over the next five years. Tompkins Company has offered to sell Santa Fe Company 20,000 units of gas filters for $25 per unit. If Santa Fe accepts the offer, some of the facilities currently used to manufacture the gas filters could be rented to a third party at an annual rate of $35,000. In addition,…
b. XYZ company produces staplers and other items. The production cost per unit is $8 and the cost of setting up the production line for this is $60. The annual holding cost rate is 30%. The company works 250 days per year. The production rate for this product is 120 per day. If the annual demand is 20,000 units, iii. What is the total production time allocated to this product annually?
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K Radovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 days per year. It has orders for about 12,400 flashing lights per year and has the capability of producing 95 per day. Setting up the light production costs $49. The cost of each light is $0.95. The holding cost is $0.15 per light per year. a) What is the optimal size of the production run? units (round your response to the nearest whole number).
Nestle Ltd. produces its premium plant food in 50 Kg bags. Demand is 100,000 Kgs. per week and the plant operates 52 weeks each year. Nestle can produce 250,000 Kgs. per week. The setup cost is OMR 200 and the annual holding cost rate is OMR 0.550 per bag. What is the optimal total cycle time including the production time in year?
A large automobile repair shop installs about 1,250 mufflers per year, 18 percentof which are for imported cars. All the imported-car mufflers are purchased froma single local supplier at a cost of $18.50 each. The shop uses a holding cost basedon a 25 percent annual interest rate. The setup cost for placing an order is estimated to be $28.a. Determine the optimal number of imported-car mufflers the shop should purchase each time an order is placed, and the time between placement of orders.b. If the replenishment lead time is six weeks, what is the reorder point based onthe level of on-hand inventory?c. The current reorder policy is to buy imported-car mufflers only once a year.What are the additional holding and setup costs incurred by this policy?
Dilute hydrogen peroxide (H,0,) is produced in the facility where you work as an engineer. The company aims to invest in an additional concentration unit for the production of concentrated hydrogen peroxide (H,0,) in line with customer demands. For the establishment of the required unit, the finance company recommends the following financing model for 3 years: 100,000 TL will be paid every month in the first year, 150,000 TL will be paid every month in the second year and 175,000 TL will be paid every month in the third year. In addition, an additional balloon payment of 700.000 TL will be made in the 36th month. The monthly interest rate is 2.5%. a) If this proposed financing model was not chosen and all installments were paid equally, what would be the monthly equal installment amount? b) What would be the amount to be paid if no payment was made for this additional concentration facility for 3 years and it was made at the end of the 3rd year? раayment Find what is required by…