Answer:
$800 debited
Explanation:
As we know that
The inventory should be reported at the cost or net realizable value whichever is lower
Since the total cost is
= 200 units × $16
= $3,200
And, the current replacement cost
= 200 units × $12 units
= $2,400
So, the inventory should be recorded at $2,400
Therefore, the cost of goods sold would be
= $3,200 - $2,400
= $800 debited
Answer:
Month
1 2 3 4 5 6
Units
Forecasted Demand 380 400 420 440 460 480
Regular Production 400 400 400 400 400 400
Overtime 0 0 0 40 40 40
Subcontracting 0 0 0 0 20 40
Inventory at end of month 20 20 0 0 0 0
Cost
Regular Production $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Overtime production cost $0 0 $0 $1,600 $1,600 $1,600
Subcontract cost $0 0 $0 $0 $1,200 $2,400
Inventory holding cost $300 $300 $0 $0 $0 $0
Total Cost $69,000
Explanation:
Answer:
1. In a Year 20,367 20,017
2. In a Year 21,333 21,917
3. In the case of NPW analysis Selected Target is best option because it is the better and cheaper investment while EUAM analysis states Walmart kit is better option,
4.Target is the best option because the cost difference is only around $600 which will last for 6 Years while in walmart case we will need to replace all the furniture in 3 Years .
Explanation:
1. Using NPW Analysis
Walmart Kit Target
Intial Cost 40000 65000
AMC 10000 12000
Salvage Value 12000 25000
Life Years 3 6
Total Cost
Intial Cost 40000 65000
Less Salvage 12000 25000
Balance 28000 40000
5% Interest 6000 19500
AMC PV 2.71 5.05
Amc 27100 60600
Total Cost 61100 120100
In a Year 20,367 20,017
2. Using EUAW Analysis
Walmart Kit
Target
Intial Cost 40000 65000
AMC 10000 12000
Salvage Value 12000 25000
Life Years 3 6
Total Cost
Intial Cost 40000 65000
Less Salvage 12000 25000
Balance 28000 40000
5% Interest 6000 19500
AMC 30000 72000
Total 64000 131500
In a Year 21,333 21,917
In the case of NPW analysis Selected Target is best option because it is the better and cheaper investment while EUAM analysis states Walmart kit is better option,
Target is the best option because the cost difference is only around $600 which will last for 6 Years while in walmart case we will need to replace all the furniture in 3 Years .
Hence Target product will be the best option we would advice the management to go for.