Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Chapter 23, Problem 7MC
Summary Introduction
Case summary:
Individual A, money related director of company W, has been inquired by the firm’s CEO, individual F, to assess the company’s stock control techniques and to lead a dialog of the subject with the senior executives. Individual A plans to utilize as a case one of company W’s “big ticket” things, a customized computer a microchip that the firm employments in its portable workstation computers. Each chip costs company W $200, and it must moreover pay its supplier a $1,000 setup charge on each arranges; the minimum the arrange measure is 250 units. Webster’s yearly usage of the figure is 5,000 units, and the yearly carrying fetched of this thing is assessed to be 20% of the normal inventory value. Individual A plans to start her session with the senior executives by looking into a few fundamental stock concepts, after which she will apply the EOQ demonstrate to company W’s microchip stock.
To determine: The effect would this have on total inventory costs, the new reorder point, and protection does the safety stock provide if usage increases, or if delivery is delayed.
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Students have asked these similar questions
Which one of the following is a reason for the just-
in-time inventory policy?
Select one:
A. The manufacturer may want to ensure that
production is uninterrupted.
B. It is possible that future supplies may
become scarce.
C. The manufacturer wants to keep the
investment in inventory to a minimum.
D. The prices of the materials are expected to
rise shortly.
Of course, there is uncertainty in Webster’s usagerate as well as in delivery times, so the companymust carry a safety stock to avoid running out ofchips and having to halt production. If a 200-unitsafety stock is carried, what effect would this haveon total inventory costs? What is the new reorderpoint? What protection does the safety stock provide if usage increases or if delivery is delayed?
Which one of the following is a reason for the just-in-time inventory policy?
Select one:
O A. The manufacturer may want to ensure that production is uninterrupted.
O B. It is possible that future supplies may become scarce.
O C. The manufacturer wants to keep the investment in inventory to a minimum.
D. The prices of the materials are expected to rise shortly.
Clear my choice
Chapter 23 Solutions
Intermediate Financial Management
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- ts) An auditor recently asked an accounting manager to perform a LCM test on a batch of inventory. Since the manager would prefer to avoid the cost of a LCM test, what GAAP argument could she use to avoid performing the test? O The cost of the test would not outweigh the benefit of the result. O Why don't you perform the test? That's what we are paying you for. O I have no reason to believe future value has dropped below the historical cost. h O The recorded cost accurately represents the costs when the inventory was produced.arrow_forwardHere are some statements about production to stock: Production to stock is justified when the plant has excess production capacity. Inventory production is desirable to avoid wasting resources. Inventory production may be justified when the manufacturer is facing sharp fluctuations in demand for its products. Inventory production may lead to an increase in the accounting profit that will be reported in the near future. Which of the above statements is true / correct? One answer must be chosen: Only statements 3 and 4 are correct. Just say 2. Just say 1. Just say 3. Just say 4.arrow_forwardComment on the company with the shorter Days Inventory Outstanding. Should they maintain this efficiency, or should they slow down? Give advantages and disadvantages for both scenarios.arrow_forward
- What is the possible negative consequence of the food business having a long average age of inventory (Days Sales Inventory; Inventory Period)? Group of answer choices Shortage of Supply. Products will command higher prices. Price Ceiling might be reached. Products may become spoiled or expired.arrow_forward2. Shepherd Cycles does not expect prices to change dramatically and wants to use a method that averages price changes. B. Which inventory method would best meet Shepherd's goal? Enter answer here. C. What if Shepherd wanted to expense out the newer purchases of goods instead? Which inventory would best meet that need? Enter answer here.arrow_forwardArgus Company anticipates that other sales will be affected by the acceptance of a special order. What should the company do? O Reject the order. O Consider the opportunity cost of lost sales in the incremental analysis. O Accept the order. O Accept the order if the plant is below capacity.arrow_forward
- A company embarked on a lean initiative and was able to significantly reduce of levels of inventory. Which of the following would not occur as a result? Decrease in overall time to produce the part Highlighting of other problems which the inventory may be masking Reducing waste of space and excess containers Decrease in inventory carrying costs. None of the above. (All would occur.arrow_forwardWhich one of the following is a disadvantage of Mass Production system? a. Higher level of inventory at all levels and hence higher inventory cost. b. Larger space requirements. c. Breakdown of one machine will stop an entire production line. d. Higher cost due to frequent set up changes.arrow_forwardCVP analysis makes all of the following assumptions except a change in volume is the only factor that affects costs. revenues are linear throughout the relevant range. the mix of products will not change. inventory levels will increase.arrow_forward
- Amber Auto Parts adopted the dollar-value LIFO inventory method. The company has consistently used a retail price index when it should have used a producer’s index. As a result, its LIFO layers have been consistently undervalued. Why is the company’s error exacerbated by the fact that the company uses the LIFO method instead of the FIFO method?arrow_forward) Why might a company estimate ending inventory instead of performing a physical count? O The mathematical estimates can determine if inventory has been lost. O The mathematical estimates are more accurate than 'doing inventory. O The mathematical estimates take less time and are all acceptable under GAAP. The mathematical estimates result in greater job security for accounting staff. ?)arrow_forwardWhat is the main criticism of LIFO? A. It presents a balance sheet figure that is out-of-date. B. It artificially creates a higher income. C. It utilizes a unit cost that has no evidence of existence. D. It is often complicated to implement, especially if inventory costs change frequently.arrow_forward
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