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Mkey [24]
3 years ago
15

Gentle Ben's Bar and Restaurant uses 6,700 quart bottles of an imported wine each year. The effervescent wine costs $4 per bottl

e and is served only in whole bottles because it loses its bubbles quickly. Ben figures that it costs $25 each time an order is placed, and holding costs are 15 percent of the purchase price. It takes three weeks for an order to arrive. Weekly demand is 134 bottles (closed two weeks per year) with a standard deviation of 30 bottles. Ben would like to use an inventory system that minimizes inventory cost and will provide a 95 percent service probability.
Required:
a. What is the economic quantity for Ben to order? (Round your answer to the nearest whole number.)
b. At what inventory level should he place an order? (Round your answer to the nearest whole number.)
Business
1 answer:
Marat540 [252]3 years ago
7 0

Answer:

a. The answer is:762 bottlé.

b. The answer is: 487 bottles.

Explanation:

a. The economic order quantity is calculated as: \sqrt{(2xDxS/H)} = \sqrt{2 x 6968 x 25)/0.6 = 762 units because: D = annual demand = Weekly demand x week opening per year = 134 x 52 = 6968; S = Cost per order = 25; H = Holding cost per unit = 15% x purchase price = 15% x 4 = 0.6

b. Inventory level to place order:

With the inventory system providing a 95 percent service probability, z level is 1.64 (using the NORM.S.INV function in excel).

So Inventory level to place order = 134 * 3 + 1.64 * 30 * 3^0.5= 487 bottles.

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Answer:

Cash   ___________________ Not Closed

Supplies _________________Not Closed

Prepaid Insurance _________ Not Closed

Land  ___________________Not Closed  

Buildings ________________Not Closed

Equipment _______________Not Closed

Accounts Payable _________ Not Closed

Unearned Rent Revenue ____Not Closed

Mortgage Payable _________Not Closed

Common Stock ___________Not Closed

Rent Revenue ____________Closed

Salaries and Wages Expense_Closed

Utilities Expense __________ Closed

Advertising Expense _______ Closed

Interest Expense __________ Closed

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Supplies Expense __________Closed

Depreciation Expense _______Closed  

Explanation:

In accounting, there are two types of accounts

  1. Temporary
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Temporary

Temporary accounts are closed at the end of each accounting period and new balance are maintained for the new period.

Expense and Income accounts are temporary accounts and these accounts are closed in the retained earning account of the balance share.

In this question following accounts are temporary accounts and these are needed to be closed at the end of the period.

Rent Revenue  

Salaries and Wages Expense

Utilities Expense  

Advertising Expense

Interest Expense

Insurance Expense

Supplies Expense  

Depreciation Expense

Permanent Accounts

Permanent accounts are not closed at the end of each accounting period and they carried their net and accumulated balance in the next period.

Assets, Equity, and Liabilities accounts are permanent accounts.

In this question following accounts are permanent accounts

Cash    

Supplies  

Prepaid Insurance  

Land

Buildings  

Equipment  

Accounts Payable  

Unearned Rent Revenue  

Mortgage Payable  

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2 years ago
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Answer:

The correct answer is $112,000

Explanation:

First of all, let us lay out the information given:

Direct materials = $170,000

Direct Labor = $230,000

Manufacturing overhead = $160,000

Cost of production = Direct material + Direct Labor + Manufacturing overhead = 170,000 + 230,000 + 160,000 = $560,000

Number of units produced = 5000 units

Number of units sold = 4000 units

Number of units left on hand = 5000 - 4000 = 1000 units (units produced - units sold)

Next, we will calculate the cost of production of a single unit of finished product as follows:

5000 units = $560,000

∴ 1 unit = 560,000 ÷ 5000 = 112

Finally, since the number of unit on hand is 1,000 units, we will find the cost of unit on hand as follows

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