Concept explainers
a
Interpretation: Number of bows at the end of fourth month is to be calculated.
Concept Introduction: Weighted average method is the method in which different numerical value is given to variable depending upon its importance. Higher the importance, larger is the numerical value given.
a
Explanation of Solution
All figures are in ‘000.
For month 1:
Calculation of average inventory::
Where,
Where,
Average inventory for 1st moth is 7500.
For month 2:
Calculation of average inventory::
Where,
Where,
Average inventory for 2nd month is25000.
For month 3:
Calculation of average inventory::
Where,
Where,
Average inventory for 3rd month is 32500.
For month 4:
Calculation of average inventory::
Where,
Where,
Average inventory for 2nd month is 32500.
Number of bows at the end of the month is 5000
b
Interpretation: The month that has the highest inventory is to be determined.
Concept Introduction: Weighted average method is the method in which different numerical value is given to variable depending upon its importance. Higher the importance, larger is the numerical value given.
b
Explanation of Solution
Fouth month has the highest inventory as ending inventory is 5000.
c
Interpretation: Total inventory cost is to be calculated.
Concept Introduction: Holding cost or inventory cost is the cost of warehousing in which unsold goods are kept. It includes transportation, warehousing, insurance etc.
c
Explanation of Solution
Cost of inventory = $1 per unit.
Total inventory cost is $85000
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Chapter 11 Solutions
Practical Operations Management
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