Question 1a In the past, there was a tendency to reduce stock in hand to minimise the cost and improve profitability. But there has recently been a growing tendency to move away from Just-in-time and carry some stock. Explain the reasons for this change in strategy. Consider recent developments and provide necessary examples. Question 1b Identify the dependent and independent demand for: (i) a fast food restaurant (ii) an integrated manufacturer of printers. Question le What are the cost trade-offs involved in each of these aspects of inventory management? (i) Buying additional amounts to take advantage of quantity discounts. (ii) Treating holding cost as a percentage of unit price instead of as a constant amount. A toy manufacturer purchases the components of the toy from an overseas supplier. The supplier has the capability to produce those components in-house. The supplier charges $12 per component, and an ordering cost of $100 is incurred every time an order is placed. The components take 3 weeks to arrive after the order is placed. More information about the production and storage is provided in Table 1. Table 1: Information on production and storage Monthly demand for the components LOG203 Copyright © 2023 Singapore University of Social Sciences (SUSS) Proctored Online Exam-July Semester 2023 6,000 units Selling Price of the toy $18 Machine Purchase Cost $5000 Holding cost 20 per cent Page 3 of 6 Note: Round Qo to an integer value, but round any other values to a maximum of two decimals. Question 2a Solve for the best quantity of components that the company should order from the supplier to minimise the annual inventory cost. What is the annual inventory cost for the company? How would the company manage its inventory so that they do not run out of stock? Question 2b The company faced component shortages several times last year, but on some occasions, it arrived earlier than promised. On average, the components were delivered in 3 weeks, and the standard deviation of delivery was 2 weeks. Based on this new information, analyse how the company's inventory policy would change if it wants to provide a service level of at least 95%.

Question 1a In the past, there was a tendency to reduce stock in hand to minimise the cost and improve profitability. But there has recently been a growing tendency to move away from Just-in-time and carry some stock. Explain the reasons for this change in strategy. Consider recent developments and provide necessary examples. Question 1b Identify the dependent and independent demand for: (i) a fast food restaurant (ii) an integrated manufacturer of printers. Question le What are the cost trade-offs involved in each of these aspects of inventory management? (i) Buying additional amounts to take advantage of quantity discounts. (ii) Treating holding cost as a percentage of unit price instead of as a constant amount. A toy manufacturer purchases the components of the toy from an overseas supplier. The supplier has the capability to produce those components in-house. The supplier charges $12 per component, and an ordering cost of $100 is incurred every time an order is placed. The components take 3 weeks to arrive after the order is placed. More information about the production and storage is provided in Table 1. Table 1: Information on production and storage Monthly demand for the components LOG203 Copyright © 2023 Singapore University of Social Sciences (SUSS) Proctored Online Exam-July Semester 2023 6,000 units Selling Price of the toy $18 Machine Purchase Cost $5000 Holding cost 20 per cent Page 3 of 6 Note: Round Qo to an integer value, but round any other values to a maximum of two decimals. Question 2a Solve for the best quantity of components that the company should order from the supplier to minimise the annual inventory cost. What is the annual inventory cost for the company? How would the company manage its inventory so that they do not run out of stock? Question 2b The company faced component shortages several times last year, but on some occasions, it arrived earlier than promised. On average, the components were delivered in 3 weeks, and the standard deviation of delivery was 2 weeks. Based on this new information, analyse how the company's inventory policy would change if it wants to provide a service level of at least 95%.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 4TIF: Profitability strategies Somerset Inc. has finished a new video game, Snowboard Challenge....

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