
1.
Material Requirement Planning (MRP) System:
The system that produces the finished goods with the help of raw material and semi finished goods is known as the material requirement planning. It involve the planning and controlling of inventory in such a way that the production will optimally generate.
Economic Order Quantity (EOQ):
Economic order quantity is the quantity of order that is purchased from supplier at a time, the EOQ aim is to reduce the carrying and ordering cost of inventory. EOQ is also referred as the optimum level of lot size.
Just-in-Time (JIT) Inventory:
Just in time inventory approach means to purchase the inventory when it is needed. This approach does not consider the storage of inventory factor. Most of the companies use this approach to avoid the wastage arises due to extra inventory. When the need of inventory arises the purchase manager will purchase the inventory from supplier.
To compute: The actual cost of producing and carrying units in inventory using MRP system.
2.
The optimum batch size and number of batches also calculate the annual cost of producing and carrying if the company uses optimal batch size. Compare this cost with the cost calculated in part1.
3.
To compute: The actual cost of producing and carrying units in inventory using JIT system.
4.
To explain: The MRP system and JIT system and there advantages and disadvantages.

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Chapter 20 Solutions
Horngren's Cost Accounting, Student Value Edition (16th Edition)
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- Variable:11, fixed :4arrow_forwardCobalt Distributors processes customer payments at its central office in Denver. The company has an average accounts receivable (A/R) balance of $4.2 million, which is financed through a line of credit at an annual interest rate of 11.8%. Management is evaluating a new lockbox system that is expected to reduce A/R by 19%. The annual cost of operating the lockbox system is $18,500. What is the estimated net annual savings from implementing the lockbox system?arrow_forwardAdam Traders is preparing its cash budget for the month of June. The company estimated credit sales for June at $180,000. Actual credit sales for May were $140,000. Estimated collections in June for credit sales in June are 25%. Estimated collections in June for credit sales in May are 60%. Estimated collections in June for credit sales prior to May are $10,000. Estimated write-offs in June for uncollectible credit sales are $6,000. The estimated provision for bad debts in June for credit sales in June is $5,000. What are the estimated cash receipts from accounts receivable collections in June?arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College