Question
What is the difference between FIFO and LIFO? B). A small refrigeration shop stocks up on electric motors from a catalog supplier located in the
What is the difference between FIFO and LIFO?
B). A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. Storage cost for the motors is $10 each. In previous years they have bought all 600 at once and they are considering doing this again. What order quantity would you advise and how much can they save using your recommendation instead of their one order per year strategy?
Quantity | Price/unit |
1-99 | $34.00 |
100-499 | $33.00 |
500 or more | $30.00 |
C). Over the past year, a company has sold the following ten items. The following table shows the annual sales in units and the cost of each item.
a.Calculate the annual dollar usage of each item.
b.List the items according to their total annual dollar usage.
c.Calculate the cumulative annual dollar usage and the cumulative percentage of items.
d.Group the items into A, B, and C groups based on percentage of annual dollar usage.
Part number | Annual unit usage | Unit cost $ | Annual $ usage |
1 | 21000 | $1 | |
2 | 5000 | $40 | |
3 | 1600 | $3 | |
4 | 12000 | $1 | |
5 | 1000 | $100 | |
6 | 50 | $50 | |
7 | 800 | $2 | |
8 | 10000 | $3 | |
9 | 4000 | $1 | |
10 | 5000 | $1 | |
Total |
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