ACCY 312 Tute 4 wk5 Inventory management-Practice question solutions PDF

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Answers for ACCY312 on inventory management. Practice question solutions...

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ACCY3 1 2 : Ma n a g e me n t Ac c o u nt i n gI I I Sp r i n g2 0 2 1 _ WEEK5 T u t o r i a l 4 : I n v e n t o r yMa n a g e me n t Ch a p t e r1 7Hor n g r e ne t a l ( 2 0 1 8 ) Pr a c t i c eQu e s t i o ns o l u t i o n s : 1 7 . 1 7 ; 1 7 . 2 3 &1 7 . 2 4 17.19 EOQ for manufacturer 1. Relevant carrying costs per part per year: Required annual return on investment 13%  $35 = Relevant insurance, materials handling, breakage, etc. costs per year Relevant carrying costs per part per year

$ 4.55 9.50 $14.05

With D = 27 500; P = $125; C = $14.05, EOQ for manufacturer is:

EOQ=

√

√

2 DP 2 ×27 500 ×125 = C 14.05

D Total relevant  P ordering costs =  Q 27 500 × $ 125 = 700

2.

= 699.52 =700 units

  

= $4 910.71 where Q = 700 units, the EOQ. 3. At the EOQ, total relevant ordering costs and total relevant carrying costs will be exactly equal. Therefore, total relevant carrying costs at the EOQ = $4 910.71 (from requirement 2). We can also confirm this with direct calculation:

Q   C  Total relevant carrying costs =  2   700  $14.05   2  = = $4 917.50 where Q = 700 units, the EOQ. The slight difference is due to rounding the EOQ from 699.51 to 700. 4. Purchase order lead time is one week. Yearly demand is 27 500 units Demand in a week is 27 500 /52 weeks is 528.9 i.e. 529 units (rounded up). Landsborough Lawns should reorder when the inventory of rotor blades falls to 529units. Reorder point = number of units sold per unit of time * purchase order lead time 529* 1 = 529 17.23 Backflush costing and JIT production 1. Inventory: Materials and In(a) Purchases of Process direct materials

Control

2 958

1

000 2 958 000

Accounts Payable Control (b) Incur conversion costs

Conversion Costs Control

777 600

Various Accounts ( c ) Completion of finished Goods

Finished Goods Control

777 600 3 744 000

Inventory: Materials and 2 937 600

In-Process Control Conversion Costs Allocated (d) Sales of finished goods

Cost of Goods Sold

806 400 3 692 000

Finished Goods Control

3 692 000

2. Under an ideal JIT production system, there would be zero inventories at the end of each day. There would be no inventory of finished goods. Entry (c) would be $3 692 000 finished goods production, not $3 744 000. Also, there would be no inventory of direct materials instead of direct materials inventory of $2 958 000 – $2 937 600 = $20,400.

17.24

Backflush costing, two trigger points, production and sale (continuation of 17.23)

1. (a) Purchase of Direct materials

Inventory Control Accounts Payable Control 2

completion

of

2 958 000 2 958 000

(b) Incur conversion costs

Conversion Costs Control

777 600

Various Accounts

(c) Completion of finished goods

No Entry

(d) Sale of finished goods

Cost of Goods Solda

777 600

3 692 000

Inventory Control

2 896 800 795 200

Conversion Costs Allocated (e) Under-allocated or Over-allocated conversion Costs

Conversion Costs Allocated Costs of Goods Sold Conversion Costs Control

a

28 400 × ($102 + $28) = $3 692 000

3

795 200 17 600 777 600...