Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

can someone help me find the answers to my homework problem that is due tonight? please i need hep finding the answers to the following

can someone help me find the answers to my homework problem that is due tonight? please
i need hep finding the answers to the following questions
1. what is the reorder point ?
2. what is the amount of safety stock?
3.what is the expected maximum inventory?
4. what is the average inventory?
5. what is the annual holding cost?
6. what is the annual ordering cost?
7. what is the amount of units purchased?
8. what is the Total annual cost of the purchase policy and the total annual cost of the production policy?
lastly, need help answering question number 6.
please and thank you !
image text in transcribed
image text in transcribed
image text in transcribed
Case Problem 1 WAGNER FABRICATING COMPANY Managers at Wagner Fabricating Company are reviewing the economic feasibility of manu- facturing a part that the company currently purchases from a supplier. Forecasted annual demand for the part is 3200 units. Wagner operates 250 days per year. Wagner's financial analysts established a cost of capital of 14% for the use of funds for investments within the company. In addition, over the past year $600,000 was the aver- age investment in the company's inventory. Accounting information shows that a total of $24,000 was spent on taxes and insurance related to the company's inventory. In addition, an estimated $9000 was lost due to inventory shrinkage, which included damaged goods as well as pilferage. A remaining $15,000 was spent on warehouse overhead, including utility expenses for heating and lighting. An analysis of the purchasing operation shows that approximately two hours are required to process and coordinate an order for the part regardless of the quantity ordered. Purchasing salaries average $28 per hour, including employee benefits. In addition, a detailed analysis of 125 orders showed that $2375 was spent on telephone, paper, and postage directly related to the ordering process. A one-week lead time is required to obtain the part from the supplier. An analysis of demand during the lead time shows it is approximately normally distributed with a mean of 64 units and a standard deviation of 10 units. Service-level guidelines indicate that one stock-out per year is acceptable. Currently, the company has a contract to purchase the part from a supplier at a cost of $18 per unit. However, over the past few months, the company's production capacity has been expanded. As a result, excess capacity is now available in certain production depart- ments, and the company is considering the alternative of producing the parts itself. Forecasted utilization of equipment shows that production capacity will be available for the part being considered. The production capacity is available at the rate of 1000 units per month, with up to five months of production time available. Management believes that with a two-week lead time, schedules can be arranged so that the part can be produced whenever needed. The demand during the two-week lead time is approximately normally distributed, with a mean of 128 units and a standard deviation of 20 units. Production costs are expected to be $17 per part. A concern of management is that setup costs will be substantial. The total cost of labor and lost production time is estimated to be $50 per hour, and a full eight-hour shift will be needed to set up the equipment for producing the part. d. Reorder point e. Amount of safety stock f. Expected maximum inventory g. Average inventory h. Annual holding cost i. Annual ordering cost j. Annual cost of the units purchased or manufactured k. Total annual cost of the purchase policy and the total annual cost of the produc- tion policy 6. Make a recommendation as to whether the company should purchase or manufacture the part . What savings are associated with your recommendation as compared with the other alternative

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Ebook Principles Of Financial Accounting

Authors: John Wild, Ken Shaw, Barbara Chiappetta

2nd Edition

0077166183, 9780077166182

Students also viewed these Accounting questions

Question

=+1. What is the brand's character or personality?

Answered: 1 week ago

Question

=+3. Who is the audience?

Answered: 1 week ago

Question

=+4. What do they (audience members) currently think?

Answered: 1 week ago