Supply-chain effects on total relevant inventory cost. Couture Jeans orders high-quality denim fab- ric 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 2,000 $ 195 $ 200 $ 30 Annual bolts demanded 2,000 Price per bolt Ordering cost per order Inspection cost per bolt Average inventory level Expected number of stockouts $ 200 $ 150 $ 30 20 20 10 10 Stockout cost of rush order $ 20 $ 15 Estimated number of jeans returned by customers because of defective fabric Cost of fixing jeans returned by customers because of defective fabric Opportunity cost of investment Other carrying costs per bolt per year 100 200 $ 25 $ 25 15% 15% $ 10 $ 10

Supply-chain effects on total relevant inventory cost. Couture Jeans orders high-quality denim fab- ric 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 2,000 $ 195 $ 200 $ 30 Annual bolts demanded 2,000 Price per bolt Ordering cost per order Inspection cost per bolt Average inventory level Expected number of stockouts $ 200 $ 150 $ 30 20 20 10 10 Stockout cost of rush order $ 20 $ 15 Estimated number of jeans returned by customers because of defective fabric Cost of fixing jeans returned by customers because of defective fabric Opportunity cost of investment Other carrying costs per bolt per year 100 200 $ 25 $ 25 15% 15% $ 10 $ 10

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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