Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 20, Problem 20.24E
EOQ for manufacturer. Sk8 Company produces skateboards and purchases 20,000 units of a wheel bearing each year at a cost of $1 per unit. Sk8 requires a 15% annual rate of
- 1. Calculate Sk8’s EOQ for the wheel bearing.
Required
- 2. Calculate Sk8’s annual relevant ordering costs for the EOQ calculated in requirement 1.
- 3. Calculate Sk8’s annual relevant carrying costs for the EOQ calculated in requirement 1.
- 4. Assume that demand is uniform throughout the year and known with certainty so there is no need for safety stocks. The purchase-order lead time is half a month. Calculate Sk8’s reorder point for the wheel bearing.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Sk8 Company produces skateboards and purchases 20,000 units of a wheel bearing each year at a cost of $1 per unit. Sk8 requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, etc.) is $0.17 per unit per year. The relevant ordering cost per purchase order is $38.40.
Q. Calculate Sk8’s EOQ for the wheel bearing.
Sk8 Company produces skateboards and purchases 20,000 units of a wheel bearing each year at a cost of $1 per unit. Sk8 requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, etc.) is $0.17 per unit per year. The relevant ordering cost per purchase order is $38.40.
Q. Calculate Sk8’s EOQ for the wheel bearing.Calculate Sk8’s annual relevant ordering costs for the EOQ .
(i) Electronics Ltd manufactures air conditioners. It purchases 200,000 units of a particular type of compressor part, CU30, each year at a cost of $64 per unit. Annual carrying cost (for insurance, material handling, breakage etc) per unit is 5% of the unit purchase price. Currently Electronics Ltd places 50 orders for 4,000 units each year and ordering costs per purchase order are $18.
d) Calculate the EOQ.e) What is the minimum ordering cost?f) What is the minimum storage cost?
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,...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- EOQ for manufacturer. Sk8 Company produces skateboards and purchases 20,000 units of a wheel bearing each year at a cost of $1 per unit. Sk8 requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, etc.) is $0.17 per unit per year. The relevant ordering cost per purchase order is $38.40.arrow_forward(i) Electronics Ltd manufactures air conditioners. It purchases 200,000 units of a particular type of compressor part, CU30, each year at a cost of $64 per unit. Annual carrying cost (for insurance, material handling, breakage etc) per unit is 5% of the unit purchase price. Currently Electronics Ltd places 50 orders for 4,000 units each year and ordering costs per purchase order are $18. a) Calculate the current annual ordering cost.b) Calculate the current annual carrying cost.c) What is the current total stock administration cost?d) Calculate the EOQ.e) What is the minimum ordering cost?f) What is the minimum storage cost?g) What is the minimum total stock administration cost?h) How much savings would Electronics Ltd. make using the EOQ policy, rather than the current policy of purchasing 4,000 units per order. (ii) Maximum usage for Electronics Ltd. for any one week is 1,000 units and the minimum usage 400 units. Suppliers take anywhere from 2 to 4 weeks to deliver supplies after…arrow_forwardSk8 Company produces skateboards and purchases 20,000 units of a wheel bearing each year at a cost of $1 per unit. Sk8 requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, etc.) is $0.17 per unit per year. The relevant ordering cost per purchase order is $38.40. Q. Assume that demand is uniform throughout the year and known with certainty so there is no need for safety stocks. The purchase-order lead time is half a month. Calculate Sk8’s reorder point for the wheel bearing.arrow_forward
- Vandenberg Inc., produces and sells two products; a celling fan and a table fan.Vandenberg plans to sell 30,000 ceiling fans and 70,000 table fans in the coming year.Product price and cost information includes; Common fixed selling and ad,inistrative expenses total $85,000. Required: 1. What is the sales mix estimated for the next year (calculated to the lowest whole number for each product)? 2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans.How many ceiling fans and table fans are sold at break-even? 3. Prepare a contribution-margin based income statement for Vandenberg,Inc.,based on the unit sales calculated in Requirement 2. 4. What if Vandenberg,Inc.,wanted to earn operating income equal to $14,000? calculate the number of ceiling fans and table fans that must be sold to earn this level of operating income.(hint;Remeber to form a package of ceiling fans and table fans based on the sales mix and to first calculate the number of packages to…arrow_forwardLakeland Company produces and purchases 20,000 units each year at a cost of $80 per unit. Lakeland requires a 15% annual rate of return on investment. In addition, the relevant carrying cost (for insurance, materials handling, breakage, and so on) is $4 per unit per year. The relevant ordering cost per purchase order is $400 Required 1- Calculate Lakeland’s EOQ. 2- Calculate the number of orders that will be placed each year. 3- Calculate Lakeland’s annual relevant ordering costs for the EOQ calculated in requirement 1 4- Calculate Lakeland’s annual relevant carrying costs for the EOQ calculated in requirement 1 5- Assume the purchase-order lead time is half a month. Calculate Lakeland’s reorder pointarrow_forwardSawtooth Industries uses an economic order quantity (EOQ) model to manage its inventory Investment. The company uses about 25,000 molded plastic assemblies each year. Order costs for these are P150 per order, while carrying costs are about P250 per unit per year. Assume a 365 day year. Sawtooth Industries' economic order quantity (EOQ) for these parts would be unitsarrow_forward
- Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $6.20 per switch. Vista’s CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 756,000 $ 1,036,150 Variable cost per switch 2.00 0.90 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 255,000 switches per year and what is the total cost of that alternative?arrow_forwardABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…arrow_forwardABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…arrow_forward
- Crandall Company sells flags with team logos. Crandall has fixed costs of $583,200 per year plus variable costs of $4.80 per flag. Each flag sells for $12.00. Requirements: : Use the equation approach to compute the number of flags Crandall must sell each year to break even. : Use the contribution margin ratio approach to compute the dollar sales CRandall needs to earn $33,000 in operating income for 2018. ( Round the contribution margin ratio to two decimal places.) : Prepare Crandall's contribution margin income statement for the year ended December 31, 2018, for sales of 70,000 flags. ( Round your final answers up to the next whole number). : The company is considering an expansion that will increase fixed costs by 21% and variable costs by $0.60 per flag. Compute the new breakeven point in units and in dollars. Should Crandall undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number).arrow_forwardsolve a,b and c please. Mcleavey Manufacturing has a demand for 1,000 pumps each year. The company outsources her production by ordering outside supplier, unit purchase price is 60$/ unit. Mc Leavey Manufacturing has to rent warehouse 10% of unit cost per year. And Mc Leavey Manufacturing pays for investment cost of 10% of unit cost per year. For ordering, the company must pay 50$/ order. a. What do you recommend if Mc Leavey Manufacturing get discount from his vendor with below schemes: Order quantity: discount price Less than 150 pumps: 5% discount rate More than 150 pumps: 10% discount rate b. If the company has plan to produce by themself then what is optimal production quantity? (given that they have production rate is 1500 units/year and setup cost is 100$). c. What is the optimal total annual inventory cost if they produce?arrow_forwardRugged Outfitters 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. Q. Compute the optimal order quantity using the EOQ model.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Inventory management; Author: The Finance Storyteller;https://www.youtube.com/watch?v=DZhHSR4_9B4;License: Standard Youtube License