Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The CH Reuter Corporation (CHR) is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. CHR's inventory of raw

image text in transcribedimage text in transcribedimage text in transcribed

The CH Reuter Corporation (CHR) is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. CHR's inventory of raw steel averages $640,000. John Oates, president of CHR, and Helen Gorman, CHR's controller, are concerned about the costs of carrying inventory. The steel supplier is willing to supply steel in smaller lots at no additional charge. (Click the icon to view the effects of adopting a JIT inventory program.) The required rate of return on investment is 20% per year and budgeted income statement for the year ending December 31, 2022, (in thousands) is as follows: : (Click the icon to view the budgeted income statement.) Required 1. Calculate the estimated dollar savings (loss) that would result in 2022 from the adoption of JIT purchasing. 2. Identify and explain other factors that should be considered before deciding whether to adopt JIT purchasing. .... Requirement 1. Calculate the estimated dollar savings (loss) that would result in 2022 from the adoption of JIT purchasing. (Enter all amounts in dollars. Leave any unnecessary cells blank. Use parentheses or a minus sign for reduction in costs and losses from adopting JIT purchasing.) Relevant costs under: Current Purchasing Policy JIT Purchasing Policy Required return on investment Annual insurance and property tax costs Warehouse rent Overtime costs Stockouts Total incremental costs Savings (loss) from adopting JIT purchasing Budgeted income statement - X 20% per year and budgeted nber 31, 2022, (in thousands) is as The CH Reuter Corporation (CHR) turning machines to manufacture pr of raw steel averages $640,000. Jol Gorman, CHR's controller, are conc The steel supplier is willing to supp! (Click the icon to view the effe me statement.) ss) that would result in 2022 from uld be considered before deciding CH Reuter Corporation Budgeted Income Statement For the Year Ending December 31, 2022 (in thousands) Revenues (930,000 units) $ Cost of goods sold Variable costs $ 4,278 Fixed costs 1,350 13,950 all amounts in dollars. Leave any Requirement 1. Calculate the estin unnecessary cells blank. Use paren 5,628 Total costs of goods sold Gross margin 8,322 Required return on investment Marketing and distribution costs Annual insurance and property tax Variable costs Warehouse rent $ 3,720 1,400 Overtime costs Fixed costs 5,120 Stockouts Total marketing and distribution costs $ 3,202 Total incremental costs Operating income Savings (loss) from adopting JIT PU Print Done The CH Reuter Corporation (CHR) is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. CHR's inventory of raw steel averages $640,000. John Oates, president of CHR, and Helen Gorman, CHR's controllerare concerned about the costs of carrying inventory The steel supplier is willi (Click the icon to v More info The required rate of return on investment is 20% per year and budgeted income statement for the year ending December 31, 2022, (in thousands) is as follows: LGIRI pent.) X uld result in 2022 from sidered before deciding ts in dollars. Leave any Requirement 1. Calcula unnecessary cells blank. Gorman identifies the following effects of adopting a JIT inventory program to virtually eliminate steel inventory: Without scheduling any overtime, lost sales due to stockouts would increase by 36,000 units per year. However, by incurring overtime premiums of $38,000 per year, the increase in lost sales could be reduced to 18,000 units per year. This would be the maximum amount of overtime that would be feasible for the company. Two warehouses currently used for steel bar storage would no longer be needed. The company rents one warehouse from another company under a cancellable leasing arrangement at an annual cost of $66,000. The company owns the other warehouse and contains 12,000 square metres. Three-quarters of the space in the owned warehouse could be rented for $1.50 per square metre per year. Insurance and property tax costs totalling $14,000 per year would be eliminated. Required return on inves Annual insurance and pr Warehouse rent Overtime costs Stockouts Print Done Total incremental costs Savings (loss) from adop

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

The Wall Street Mba

Authors: Reuben Advani

2nd Edition

007178831X, 9780071788311

More Books

Students also viewed these Accounting questions

Question

What are the values and risks of self-disclosing communication?

Answered: 1 week ago