Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 20, Problem 20.23E
EOQ for a retailer. The Fabric World sells fabrics to a wide range of Industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information:
| Annual demand for denim cloth | 40,700 yards |
| Ordering cost per purchase order | $185 |
| Carrying cost per year | 10% of purchase costs |
| Safety-stock requirements | None |
| Cost of denim cloth | $11 per yard |
The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week).
- 1. Calculate the EOQ for denim cloth.
Required
- 2. Calculate the number of orders that will be placed each year.
- 3. Calculate the reorder point for denim cloth.
Expert Solution & Answer
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Required information
[The following information applies to the questions displayed below.]
Ellery Products manufactures various components for the fashion industry. Ellery buys fabric from two vendors: Ewers
Textiles and Bramford Materials. Ellery chooses the vendor based on price. Once the fabric is received, it is inspected to
ensure that it is suitable for manufacturing purposes. Ellery disposes of fabric that is deemed unsuitable.
The controller at Ellery collected the following information on purchases for the past quarter:
Total purchases (yards)
Fabric discarded (yards)
Ewers
19,800
990
Bramford
36,900
4,428
The purchasing manager has just received bids on an order for 800 yards of fabric from both Ewers and Bramford. Ewers
bid $2,261 and Bramford bid $2,134.
Assume that the average quality, measured by the amounts discarded from the two companies, will continue as in the past.
Required:
a. What bid by Ewers would make Ellery indifferent between buying from Ewer or Bramford?…
!
Required information
[The following information applies to the questions displayed below.]
Ellery Products manufactures various components for the fashion industry. Ellery buys fabric from two vendors: Ewers
Textiles and Bramford Materials. Ellery chooses the vendor based on price. Once the fabric is received, it is inspected to
ensure that it is suitable for manufacturing purposes. Ellery disposes of fabric that is deemed unsuitable.
The controller at Ellery collected the following information on purchases for the past quarter:
Total purchases (yards)
Fabric discarded (yards)
Ewers
19,800
990
Bramford
36,900
4,428
The purchasing manager has just received bids on an order for 800 yards of fabric from both Ewers and Bramford. Ewers
bid $2,261 and Bramford bid $2,134.
Required:
1-a. Assume that the average quality, measured by the amounts discarded from the two companies, will continue as in the past. What
is the effective cost per 800 yards for both Ewers and Bramford?
1-b. Which…
ABC, wholesale, customer protability. Veritek Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Veritek commented, “We apply ABC to determine product-line protability. The same ideas apply to customer protability, and we should nd out our customer protability as well.” Veritek Wholesalers sends catalogs to corporate purchasing departments on a monthly basis. The customers are entitled to return unsold merchandise within a six-month period from the purchase date and receive a full purchase price refund. The following data were collected from last year’s operations:
Chapter 20 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 20 - Why do better decisions regarding the purchasing...Ch. 20 - Name six cost categories that are important in...Ch. 20 - What assumptions are made when using the simplest...Ch. 20 - Give examples of costs included in annual carrying...Ch. 20 - Give three examples of opportunity costs that...Ch. 20 - What are the steps in computing the cost of a...Ch. 20 - Why might goal-congruence issues arise when...Ch. 20 - JIT purchasing has many benefits but also some...Ch. 20 - What are three factors causing reductions in the...Ch. 20 - You should always choose the supplier who offers...
Ch. 20 - Prob. 20.11QCh. 20 - What are the main features of JIT production, and...Ch. 20 - Distinguish inventory-costing systems using...Ch. 20 - Describe three different versions of backflush...Ch. 20 - Discuss the differences between lean accounting...Ch. 20 - The order size associated with the...Ch. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Lyle Co. has only one product line. For that line,...Ch. 20 - Just-in-time inventory assumes all of the...Ch. 20 - Economic order quantity for retailer. Wonder Line...Ch. 20 - Economic order quantity, effect of parameter...Ch. 20 - EOQ for a retailer. The Fabric World sells fabrics...Ch. 20 - EOQ for manufacturer. Sk8 Company produces...Ch. 20 - Sensitivity of EOQ to changes in relevant ordering...Ch. 20 - JIT production, relevant benefits, relevant costs....Ch. 20 - Backflush costing and JIT production. Grand...Ch. 20 - Backflush costing, two trigger points, materials...Ch. 20 - Backflush costing, two trigger points, completion...Ch. 20 - Prob. 20.30PCh. 20 - Prob. 20.31PCh. 20 - Prob. 20.32PCh. 20 - Prob. 20.33PCh. 20 - JIT purchasing, relevant benefits, relevant costs....Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Supply-chain effects on total relevant inventory...Ch. 20 - Backflush costing and JIT production. The Acton...Ch. 20 - Backflush, two trigger points, materials purchase...Ch. 20 - Backflush, two trigger points, completion of...Ch. 20 - Lean accounting. Reliable Security Devices (RSD)...Ch. 20 - JIT production, relevant benefits, relevant costs,...
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