Panther Tyres Inc., produces 50,000 units each day, and the average number of units in work in process is 200,000. The average annual inventory carrying cost percentage is 25%, and the average work in process is $1,000,000. Required: Determine the throughput time. Compute the annual carrying costs. If the same daily output can be achieved while reducing the work in process by 50%, determine the new throughput time. What has happened to the velocity of production in part 3? Compute the annual carrying costs for part 3.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Panther Tyres Inc., produces 50,000 units each day, and the average number of units in work in process is 200,000. The average annual inventory carrying cost percentage is 25%, and the average work in process is $1,000,000.
Required:
- Determine the throughput time.
- Compute the annual carrying costs.
- If the same daily output can be achieved while reducing the work in process by 50%, determine the new throughput time.
- What has happened to the velocity of production in part 3?
- Compute the annual carrying costs for part 3.
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