Use Figures 2.8 through 2.10 for this problem. Assume that the raw materials and purchased parts each represent 30% of the cost of goods sold and that value added (labor plus factory overhead) constitutes the remaining 40%. Also assume that each production cycle involves the production of 1000 units of finished goods, each valued (at cost) at $10/unit. In each case depicted in the figures, ascertain the appropriate overall value of ¯

I v (i.e., the average inventory level, expressed in dollars). Also describe, in terms of the production and demand processes, how each of the patterns could result.

Transcribed Image Text:

Value of inventory Labor and factory overhead Raw material and purchased parts 6 8 10 Time Figure 2.8 Case a for inventory valuation Problem 2.7. Finished goods 12 12 14