Evaluate the economic order quantity for glass

Assignment Help Cost Accounting
Reference no: EM133378

Question :

Buffalo Falls Ltd manufactures among other things, glass table tops. It uses a just-in-time system of production for its table tops. Thus it orders the glass used in production in bulk. The glass takes up a lot of space in the company's warehouse, and often is damaged through storage. Accordingly Buffalo Falls has decided to trial a Just-in-Time (JIT) purchasing system. The subsequent data relate to this system.

  • Demand for table tops is estimated to be 9,000 units for the coming year.
  • Presently, each table top needs on average ½ a sheet of glass. This adds an amount for reworks and scrap. Under the JIT system, reworks and scrap are expected to be minimal; thus only 1/3 a sheet of glass is expected to be used per table top.
  • Each sheet of glass presently costs $60. This will not change under JIT.
  • Presently Buffalo Falls orders glass in lots of 1,000 sheets. With the introduction of JIT this may fall to 50 sheets.
  • Every order costs $100, but will fall by 50% under JIT.
  • Damaged inventory is evaluated to be on average $5 per average unit held. This can't be incurred under JIT.
  • Other carrying costs amount to $60 per unit. This can't change if JIT is introduced.
  • Buffalo Falls can't need as much warehouse space, thus will lease 75% of an existing warehouse to another firm for $2 per square meter. The warehouse has 30,000 square meters.
  • Three employees who presently earn $30,000 each will be directly affected by the just-in-time adoption decision. Two can be transferred to other positions within Buffalo Falls; one will be fired.
  • Buffalo Falls expects that it can lose sales amounting to 250 table tops with the introduction of JIT. Selling price of these items will be $200 per item, and variable costs per item can be $60 and fixed costs will be $20 per item.
  • Consider Buffalo Falls has a required rate of return of 30% per annum.

Required:

a) Evaluate the Economic Order Quantity for glass.

b) Determine total annual cost of ordering and carrying the glass.

Reference no: EM133378

Questions Cloud

What is the increase or decrease in liabilities : What is the increase or decrease in liabilities of Hodges as of October 31, 2013?
Use jsp to prepare an amortization table for a loan : Use JSP to prepare an amortization table for a loan
Program on bst : Program on BST
What are the main ethical issues of marketing : What are the main ethical issues of marketing Identify and explain the various steps in the marketing research process
Evaluate the economic order quantity for glass : Determine total annual cost of ordering and carrying the glass. Evaluate the Economic Order Quantity for glass.
Law and legal methods : mechanisms of ADR, judicial review, subsidiary legislation, valid contract, types of contract, Judicial Review Action
Evaluate the brocks individual tax return : Evaluate the Brock's individual tax return
Calculate the die cost : Calculate the die cost
Estimated federal tax payments : Prepare a seven - year forecast of net operating income for the Sated Satyr Apartments

Reviews

Write a Review

 

Cost Accounting Questions & Answers

  Write a program that pulls four quarterly sales figure

Write a program that Pulls four quarterly sales figure

  Prepare the financial statements for the walt disney company

Prepare the 2009 financial statements for The Walt Disney Company on the Internet.

  Prepare any essential journal entry or entries

Prepare any essential journal entry or entries

  Effect of exchange rate changes on cash and cash

Effect of exchange rate changes on cash and cash

  What price should be set for the product

What price should be set for the product? Which of the prices evaluated above would the company as a whole most prefer?

  Cost-volume-profit analysis for non accountants

Preparing a seminar on cost-volume-profit analysis for non accountants

  Plan journal entries to record the preceding transactions

Plan journal entries to record the preceding transactions on the assumption that the bonus method is used.

  Inventory and warehousing cycle.

Inventory and warehousing cycle and cash cycle

  What is the cumulative cash flow at the end of Quarter

What is the cumulative cash flow at the end of Quarter

  Evaluate the amount of shortage

Explain the circumstances under which the retail inventory method would be applied and the advantages of using the retail inventory method.

  Evaluate the cost will be recovered from future sales

Evaluate the cost will be recovered from future sales

  Evaluate the cost of the ending inventory

Evaluate the cost of the ending inventory of three methods

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd