Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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20-31 EOQ, uncertainty, safety stock, reorder point. Phillips Corporation is a major manufacturer of food
processors. It purchases motors from Viking Corporation. Annual demand is 52,000 motors per year or 1,000
motors per week. The ordering cost is $360 per order. The annual carrying cost is $6.50 per motor. It cur-
rently takes 2 weeks to supply an order to the assembly plant.
1. What is the optimal number of motors that Phillips's managers should order according to the EOQ model?
2. At what point should managers reorder the motors, assuming that both demand and purchase-order
lead time are known with certainty?
3. Now assume that demand can vary during the 2-week purchase-order lead time. The following table
shows the probability distribution of various demand levels:
Required
Total Demand for Motors for 2 Weeks
1,600
1,800
2,000
2,200
Probability of Demand (sums to 1)
0.05
0.20
0.50
0.20
0.05
2,400
If Phillips runs out of stock, it would have to rush order the motors at an…
None
Mecca Copy, a photocopying center located on University Avenue, provided the following data to prepare a budgeted balance sheet
for next year.
Cash
Accounts receivable
Supplies inventory
Equipment
Accumulated depreciation
Accounts payable
Common stock
Retained earnings
Ending
Balances
?
$ 8,200
$ 3,200
$ 34,500
$ 14,000
$ 1,900
$ 5,000
?
The beginning balance of retained earnings was $29,000, budgeted net income is $12,700, and budgeted dividends are $2,500.
Required:
Prepare the company's budgeted balance sheet.
Note: Amounts to be deducted should be indicated by a minus sign.
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