A company is about to begin production of a new product. The manager of the department...

A company is about to begin production of a new product. The manager of the department that will produce one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units will be used daily in assembling the final product. Assembly will take place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at a cost of $300. Inventory holding costs will be $10 a year.

a. What run quantity should be used to minimize total annual costs?

b. How many days does it take to produce the optimal run quantity?

c. What is the average amount of inventory?

Expert Solution

Answers:
a. What run quantity should be used to minimize total annual costs?	1414.21	Units
b. How many days does it take to produce the optimal run quantity?	7.07	7 Days
c. What is the average amount of inventory?	424.26	units

Formulas:

keosha answered 4 months ago

The production department of Y Company is planning to purchase a new machine to improve product...

The production department of Y Company is planning to purchase a new machine to improve product quality. The company’s management accountant is currently evaluating two options- Buy the machine OR Rent it. Following information is available: The company has to pay £3,200 to set up the machine. Insurance cost £450 per annum. If it is bought, the new machine is depreciated on reducing balance basis at the rate of 25%. After various calculations, the company has to pay £4,200 maintenance...

A firm plans to begin production of a new small appliance. The manager must decide whether...

A firm plans to begin production of a new small appliance. The manager must decide whether to purchase the motors for the appliance from a vendor for $7.30 each or to produce them in house. There are two in house options. Option 1 would have an annual fixed cost of $160000 and a variable cost of $5.30. Option 2 would have an annual fixed cost of $191000 and a variable cost of $3.90. Calculate the maximum quantity that would have...

The manager of a department store is thinking about establishing a new billing system for the...

The manager of a department store is thinking about establishing a new billing system for the store's credit customers. She determines that the new system will be cost effective only if the mean monthly account is more than $170. A random sample of 400 monthly accounts is drawn for which the sample mean is $178. The manager knows that the accounts are approximately normally distributed with a standard deviation of $65. Can the manager conclude from this that the new...

Kirby Company plans to begin selling a new product line. The company projectws sales for the...

Kirby Company plans to begin selling a new product line. The company projectws sales for the next four years of $100,000, $230,000, $180,000 and $245,000. In order to meet these sales goals, Kirby Company needs to have 30% of the following year's sales on hand as inventory prior to the start of the year. How will these inventory purchases be reflected in the capital budgeting analysis for Kriby Company?

IBL Company manager asked his statistic team to give to the production department the data on...

IBL Company manager asked his statistic team to give to the production department the data on the number of phones manufactured over the 20 months.. The data collected are as follows: Months # of phones produced 1 2045 2 1566 3 9075 4 4563 5 5052 6 3465 7 2542 8 4134 9 3567 10 5163 11 4563 12 2453 13 462 14 2772 15 4263 16 5052 17 2846 18 5052 19 4130 20 5062 REQUIRED PART A 1....

Frederick is the manager of a company that produces toasters. He has instructed his production department...

Frederick is the manager of a company that produces toasters. He has instructed his production department to replace a steel handle shaft with a plastic shaft. This will save the company $1 per toaster. Since making this change, the toasters are being returned in great quantities because of handle breakage. Frederick tries to hide his poor decision. He instructs the accountant to ignore the returned items and put them back into inventory so they can be resold. Manufacturing was told...

David Wong, the product manager of KiKi Company, was reviewing the production schedule for the last...

David Wong, the product manager of KiKi Company, was reviewing the production schedule for the last quarter of 2020. He noted that the company planned to sell 4,000 units during the year and keep a minimum closing inventory level at 100 units on 31 December 2020. As at 30 September 2020, the following data was reported. Units Inventory, 1 January 2020 0 Production 3,000 Sales 2,700 Inventory, 30 September 2020 300 At the beginning of the year, the company rented...

Drake is a department manager in a company which has recently decided to hire a new...

Drake is a department manager in a company which has recently decided to hire a new analyst. After interviewing all candidates, Drake recommended the company hire Anne, but senior management preferred to hire Beth. Drake argued that Beth is an inferior choice, but agreed to accept her for a trial period of six months. At the end of the trial period, Drake evaluated Beth’s performance as poor. Although this evaluation may have been fair, it is also possible that it...

A manager is trying to estimate the manufacturing costs of a new product. The company makes...

A manager is trying to estimate the manufacturing costs of a new product. The company makes several other products that utilize some of the same manufacturing procedures as the new product. Which cost estimation method would be the best method to determine the total cost of manufacturing the new product? A. Engineering estimates. B. Regression analysis. C. Account analysis. D. Scattergraph.

The marketing department has proposed selling your company's product line in a new export market. Production...

The marketing department has proposed selling your company's product line in a new export market. Production equipment (Class 43) with a CCA rate of 30% costing $100,000 will be needed, as will installation and training estimated at $10,000 each. These costs will all occur at time 0. Project cash flows before tax are forecast to be $40,000 per year over the 4-year project life. An initial investment in net working capital of $4,000 will be needed, and each year net...

Question