Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Question
Chapter 20, Problem 20.32P
1.
To determine
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.
To determine
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 determine
To compute: The actual cost of producing and carrying units in inventory using JIT system.
4.
To determine
To explain: The MRP system and JIT system and there advantages and disadvantages.
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Tech Works Corp. produces J-Pods, music players that can download thousands of songs. Tech Works forecasts that demand in 2017 will be 48,000 J-Pods. The variable production cost of each J-Pod is $54. In its MRP system, due to the large $10,000 cost per setup, Tech Works plans to produce J-Pods once a month in batches of 4,000 each. The carrying cost of a unit in inventory is $17 per year.
Q. Using the MRP system, what is the annual cost of producing and carrying J-Pods in inventory? (Assume that, on average, half of the units produced in a month are in inventory.)
Tech Works Corp. produces J-Pods, music players that can download thousands of songs. Tech Works forecasts that demand in 2017 will be 48,000 J-Pods. The variable production cost of each J-Pod is $54. In its MRP system, due to the large $10,000 cost per setup, Tech Works plans to produce J-Pods once a month in batches of 4,000 each. The carrying cost of a unit in inventory is $17 per year.
Q.Tech Works is also considering switching from its MRP system to a JIT system. This will result in producing J-Pods in batch sizes of 600 J-Pods and will reduce obsolescence, improve quality, and result in a higher selling price. Tech Works will reduce setup time and setup cost. The new setup cost will be $500 per setup. What is the annual cost of producing and carrying J-Pods in inventory under the JIT system?
Tech Works Corp. produces J-Pods, music players that can download thousands of songs. Tech Works forecasts that demand in 2017 will be 48,000 J-Pods. The variable production cost of each J-Pod is $54. In its MRP system, due to the large $10,000 cost per setup, Tech Works plans to produce J-Pods once a month in batches of 4,000 each. The carrying cost of a unit in inventory is $17 per year.
Q. A new manager at Tech Works has suggested that the company use the EOQ model to determine the optimal batch size to produce. (To use the EOQ model, Tech Works needs to treat the setup cost in the same way it would treat ordering cost in a traditional EOQ model.) Determine the optimal batch size and number of batches. Round up the number of batches to the nearest whole number. What would be the annual cost of producing and carrying J-Pods in inventory if it uses the optimal batch size?
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,...
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