EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475950
Author: Datar
Publisher: PEARSON CO
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Question
Chapter 20, Problem 20.33P
1.
To determine
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.
To compute: The optimum order quantity using EOQ model.
2. a.
To determine
To compute: The number of order per year.
2.b.
To determine
To compute: The annual relevant total cost of ordering and carrying inventory.
3.
To determine
To compute: The optimum order quantity using EOQ model, the annual relevant total cost of ordering and carrying inventory.
4.
To determine
To explain: The cost impact on the company of excluding opportunity cost of carrying inventory when making EOQ decisions. Explain the reason of excluding the opportunity cost of carrying inventory when evaluating manager performance and also specify method to company to encourage manger to make decision more congruent with the goal of reducing total inventory cost.
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Effect of management evaluation criteria on EOQ model. Rugged Outtters purchases one model of mountain bike at a wholesale cost of $520 per unit and resells it to end consumers. The annual demand for the company’s product is 49,000 units. Ordering costs are $500 per order and carrying costs are $100 per bike per year, including $40 in the opportunity cost of holding inventory.
A new purchasing agent has been hired by company XYZ who wants to start using EOQ method
And its supporting decision elements. The following information has been gathered
Annual demand in units 260,000 units
Working days per year
Lead time in days
260
12
Ordering cost per purchase order
Annual unit carrying cost
160
30
Required: (5pts each)
a)
Find the EOQ
b) Number of orders to be made per year
c)
Average daily demand
d)
Total ordering cost
e)
Total carrying cost
What is the total relevant cost with the EOQ
g)
Select a ordering amount ABOVE the EOQ, what is the total relevant ordering and total relevant carrving cost and grand total of both
h)
IF the company has been ordering in quantity of 1000 units, what is the S savings by now using the EOQ
Question 5:
IKIT company produces and sells recliner chairs. IKIT uses an absorption
product costing system, which means that both variable and fixed
overhead are included in the product cost. Cost estimates for a recliner
chair and expected production volume for next year are as follows:
Per Unit
Total
$40
$20
Direct materials
Direct labour
Variable manufacturing overhead
Variable selling and administrative expenses
Fixed selling and administrative expenses
Fixed manufacturing overhead
Expected volume of production (units):
$14
$15
$380,000
$460,000
42,000
The company's owners expect to earn a rate of return (ROI) of 30% on their
invested assets of $2,500,000.
Required:
a. IKIT currently uses the cost-plus pricing method. Compute the mark-up
percentage and target selling price that will allow IKIT to earn its desired
ROI of 30% for next year..
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Chapter 20 Solutions
EBK HORNGREN'S COST ACCOUNTING
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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