May $125,000 $460,000 June $95,000 $220,000 July $72,000 $85,000 August $45,000 $156,000 September $52,500 $220,000 October $120,000 $265,000 November $162,500 $100,000 December $255,000 $350,000 Compute the monthly inventory turnover ratio for each of the twelve months. What are the annual cost of goods sold and the average inventory for the year? Compute the annual inventory turnover ratio. What can the purchasing department do to improve the firm’s performance? Ans.: (see Excel Worksheet below) The purchasing department can reduce order quantity and work with suppliers to deliver purchased items more frequently. This should lower total inventory. You are the following information: Make Option Buy Option Fixed Cost $125,000 $5,000 Variable Cost $15 $17 Find the break-even quantity and the total cost at the break-even point. Ans.: (see attached Worksheet) Breakeven quantity, Q = 60,000 units; cost at breakeven point = $1,025,000 If the requirement is 150,000 units, is it more cost-effective for the firm to buy or make the components? What is the cost savings for choosing the cheaper option? Ans.: (see attached Excel Worksheet) Make option is cheaper; cost saving = $2,555,000 - $2,375,000 = $180,000 You are given the following information: Costs Make Option Buy Option Fixed Cost $25,000 $3,000 Variable Cost $8 $12 Find the break-even quantity and the total cost at the break-even point.
May $125,000 $460,000 June $95,000 $220,000 July $72,000 $85,000 August $45,000 $156,000 September $52,500 $220,000 October $120,000 $265,000 November $162,500 $100,000 December $255,000 $350,000 Compute the monthly inventory turnover ratio for each of the twelve months. What are the annual cost of goods sold and the average inventory for the year? Compute the annual inventory turnover ratio. What can the purchasing department do to improve the firm’s performance? Ans.: (see Excel Worksheet below) The purchasing department can reduce order quantity and work with suppliers to deliver purchased items more frequently. This should lower total inventory. You are the following information: Make Option Buy Option Fixed Cost $125,000 $5,000 Variable Cost $15 $17 Find the break-even quantity and the total cost at the break-even point. Ans.: (see attached Worksheet) Breakeven quantity, Q = 60,000 units; cost at breakeven point = $1,025,000 If the requirement is 150,000 units, is it more cost-effective for the firm to buy or make the components? What is the cost savings for choosing the cheaper option? Ans.: (see attached Excel Worksheet) Make option is cheaper; cost saving = $2,555,000 - $2,375,000 = $180,000 You are given the following information: Costs Make Option Buy Option Fixed Cost $25,000 $3,000 Variable Cost $8 $12 Find the break-even quantity and the total cost at the break-even point.