Your company assembles five different models of a motor scooter that is sold in specialty stores in the United States. The company uses the same engine for all five models. You have been given the assignment of choosing a supplier for these engines for the coming year. Due to the size of your warehouse and other administrative restrictions, you must order the engines in lot sizes of 1,000 units. Because of the unique characteristics of the engine, special tooling is needed during the manufacturing process for which you agree to reimburse the supplier. Your assistant has obtained quotes from two reliable engine suppliers and you need to decide which to use. The following data have been collected:Requirements (annual forecast) 12,000 units
Weight per engine 22 pounds
Order processing cost $125 per order
Inventory carry cost 20 percent of the average value of inventory per year
Assume that half of lot size is in inventory on average (1,000/2 = 500 units).
Two qualified suppliers have submitted the following quotations:
ORDER QUANTITY SUPPLIER 1 UNIT PRICE SUPPLIER 2 UNIT PRICE
1 to 1,499 units/order $510.00 $505.00
1,500 to 2,999 units/order 500.00 505.00
3,000 + units/order 490.00 488.00
Tooling costs $22,000 $20,000
Distance 125 miles 100 miles
Your assistant has obtained the following freight rates from your carrier:
Truckload (40.000 lbs. each load): $0.80 per ton-mile
Less-than-truckload: $1.20 per ton-mile
Required:
a. Calculate the total cost for each supplier.
b. Which supplier would you select?
c. If you could move the lot size up to ship in truckload quantities, calculate the total cost for each supplier.
d. Would your supplier selection change?
Answers
Answer:
a. Cost of Supplier 1 : $6,214,300 per year
Cost of Supplier 2 : $6,147,840
b. Supplier 2 will be selected as it costs $66,460 less than supplier 1.
c. 1,818
d. No.
Explanation:
Supplier : 1 ; 2
Unit price : $510 ; $505
Annual Purchase cost: $6,120,000 ; $6,060,000
One time cost: $22,000 ; $20,000
Orders per year: 12 , 12
Order processing cost: $1,500 ; $1,500
Inventory carrying cost: $51,000 ; $50,500
Distance: 125 ; 100
Weight per load: 22000
Transportation: $19,800 ; $15,840
Total Cost : $6,214,300 ; $6,147,840
Annual Purchase Cost = Demand * Units price
Orders per year = Demand / Lot size
Inventory Carrying cost = [ Lot size / 2 ] * Carrying cost * unit price
Order processing cost = Number of orders * order processing cost.
c. Required lot size for truck : 40,000 / 22 ≈ 1,818
Final answer:
To select a supplier for engines, the total cost for each supplier is calculated based on various factors such as order quantity, unit price, tooling costs, distance, freight rates, order processing cost, and inventory carry cost. Supplier 2 is selected as the preferred choice due to its lower total cost. If the lot size is increased to ship in truckload quantities, the total cost for both suppliers changes, but the supplier selection remains the same.
Explanation:
To calculate the total cost for each supplier, we need to consider the order quantity, unit price, tooling costs, distance, freight rates, order processing cost, and inventory carry cost. By multiplying the order quantity by the unit price and adding the tooling costs, we can calculate the total cost. For supplier 1, the total cost is $488,000 and for supplier 2, the total cost is $487,625. Considering the lower total cost, supplier 2 would be selected. If the lot size is increased to ship in truckload quantities, the freight rates will change. With a truckload rate of $0.80 per ton-mile, the total cost for supplier 1 becomes $486,650 and for supplier 2 becomes $486,794. Therefore, the supplier selection remains the same, with supplier 2 as the preferred choice.
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Related Questions
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Mary signed up and paid $660 for a 6 month ceramics course on June 1st with Choplet Ceramics. As of August 1st, Choplet’s accounting records would indicate:
Harwinton, Inc. anticipates sales of 56,000 units, 54,000 units, 57,000 units and 56,000 units in July, August, September and October, respectively. Company policy is to maintain an ending finished-goods inventory equal to 50% of the following month's sales. On the basis of this information, how many units would the company plan to produce in September?
Motors is a chain of car dealerships. Sales in the fourth quarter of last year were $4,600,000. Suppose management projects that its current year's quarterly sales will increase by 3% in quarter 1, by another 7% in quarter 2, by another 5% in quarter 3, and by another 4% in quarter 4. Management expects cost of goods sold to be 45% of revenues every quarter, while operating expenses should be 30% of revenues during each of the first two quarters, 25% of revenues during the third quarter, and 20% during the fourth quarter.Required:a. Prepare a budgeted income statement for each of the four quarters and for the entire year.b. Prepare the first portion of the budgeted income statement through gross profit, then complete the statement.
O it is difficult to determine the relevant industry and geographic market.
O it is an expensive and time-consuming standard.
O each action of a firm must be analyzed separately and within a particular context.
Answers
Answer:
The problem faced while using the judgement by the market structure criteria is that it is difficult for determining the geographic market and the relevant industry.
Explanation:
Market structures criteria are the kind or type of goods and services being traded, the size as well as the numbers of the consumers and the producers in the market and the degree to which the information could flow freely.
So, the problem which can be faced while using the judgement by the market structure criteria is that it is difficult for determining the geographic market and the relevant industry.
Answers
Answer:
Option (a) is correct.
Explanation:
Contribution margin per marketing plan = Sales - Variable cost
= $3,000 - $2,000
= $1,000
A.
(1)
Break even in marketing plan = 400
(2) Break-even in dollars:
= Break-even in marketing plan × Average rate per plan
= 400 × 3,000
= 1,200,000
(3) Margin of safety = Actual sales - Break-even sales in dollars
= 1,500,000 - 1,200,000
= 300,000
= 20%
B.
(1) Contribution margin per marketing plan = Sales - Variable cost
= $4,000 - $2,000
= $2,000
Break even in marketing plan = 200
(2) Break-even in dollars:
= Break-even in marketing plan × Average rate per plan
= 200 × 4,000
= 800,000
(3) Margin of safety = Actual sales - Break-even sales in dollars
= 1,500,000 - 800,000
= 700,000
= 47%
Therefore, option (a) would achieve the margin of safety ratio more than 45%.
Answers
Answer:
Explanation:
The journal entry to record the note payable at discount
Cash A/c Dr $497,000
Discount on Note payable A/c Dr $12,000
To Note Payable A/c $509,000
(Being the note payable is recorded at discount)
Now we know that the discount is for 3 months but we have to calculated for 2 months only i.e from November 1 to December 31
So, the discount would be
= $12,000 × 2 months ÷ 3 months
= $8,000
And the journal entry is
Interest Expense A/c Dr $8,000
To Discount on Note payable A/c $8,000
(Being the interest expense is recorded)
Purchases (gross) 697,000
Freight-in 31,400
Sales revenue 924,000
Sales returns 73,200
Purchase discounts 12,100
Compute the estimated inventory at May 31, assuming that the gross profit is 40% of net sales
Answers
Answer:
The estimated inventory at May 31 is $240,100
Explanation:
The gross profit is the difference between the sales revenue and the cost of good sold.
The gross profit percentage is the ratio of gross profit to net sales expressed as a percentage.
Net sales is the sales less returns and allowances. Similar to net sales is net purchases which is the gross purchase net the allowances and returns.
Net purchases = $697,000 - $12,100
= $684,900
Net sales = $924,000 - $73,200
= $850,800
Gross profit margin percent = gross profit/net sales
gross profit = 0.4 * $850,800
= $212,700
cost of goods sold = $850,800 - $212,700
= $638,100
The movement in the balance of inventory at the start and end of a period is as a result of sales and purchases. While sales reduces the balance in inventory, purchases increases the balance. This may be expressed mathematically as
Opening balance + purchases + freight inward - cost of goods sold = closing balance
$161,900 + $684,900 + $31,400 - $638,100 = Estimated ending inventory
Estimated ending inventory = $240,100
Check all that apply.
O Send a separate letter to each interviewer.
O Use a business letter format.
O Mention something you liked about the interview.
O Send thank-you letters to prospective coworkers.
O Send a quick text to the interviewer
Answers
Answer:
The answers that seem to be correct are *Mention something you liked about the interview and *Use a business letter format. This would be a polite and friendly kind of a feedback mixed with good professionalism.
Explanation:
Now let's see why we rejected the other answer options.
1st of all, Sending a separate letter to each interviewer might be difficult as it could be really difficult to find the contact information of all the interviewers.
Sending thank-you letters to prospective co-workers is not a appropriate thing as you have not been selected still for the job.
Sending a quick text to the interviewer might not be appropriate as well. This is because those who interviewed you during the process are much more experienced and qualified than you and you should maintain your relationship with them professionally and with the utmost respect.
B. Short-run marginal cost increases as output increases
C. Long-Run marginal cost increases as output increases
D. Short-run average cost increases as output increases
E. As output doubles, long run total cost more than doubles
Answers
Answer:
B. Short-run marginal cost increases as output increases
Explanation:
diseconomies of scale are the cost disadvantages that economic actors accrue due to an increase in organizational size or on output, resulting in production of goods and services at increased per-unit costs.