Reference no: EM133148051

QUESTION 1

A). Describe at least six (6) costs involved in the Management of Materials

B). If the cost of manufacturing (direct material and direct labour) is 60% of sales and profit is

10% of sales, what would be the improvement in profit if, through better planning and control, the cost of manufacturing was reduced from 60% of sales to 55% of sales?

	Existing	Improvement
Sales	100%
Cost of manufacturing	60%
Other cost	30%
Profit

C). Using the information in Part A, how much would sales have to increase to, to provide the same increase in profits?

QUESTION 2

A) On the average, a firm has 10 weeks of work-in-process, and annual cost of goods sold is $15 million. Assuming that the company works 50 weeks a year:

1. What is the dollar value of the work-in-process?

2. If the work-in-process could be reduced to 7 weeks and the annual cost of carrying inventory was 20% of the inventory value, what would be the annual saving?

B). Warsop Factory sales are $10 million. The company spends $3.5 million for purchase of direct materials and $2.5 million for direct labor; overhead is $3.5 million and profit is $500,000. Direct labor and direct material vary directly with the cost of goods sold, but overhead does not. The company wants to triple its profit.

a. By how much should the firm increase sales?

b. By how much should the firm decrease material costs?

c. By how much should the firm decrease labor cost?

QUESTION 3

A). Describe each of the three basic strategies used in developing a production plan. What are the advantages and disadvantages of each?

B). A company wants to develop a level production plan for a family of products. The opening inventory is 100 units, and an increase to 150 units is expected by the end of the plan. The demand for each period is given in what follows. How much should the company produce each period? What will be the ending inventories in each period? All periods have the same number of working days.

Period		1	2	3	4	5	6	Total
Forecast Demand		100	120	130	140	120	110
Planned Production
Planned Inventory	100

C). For the following data, calculate the number of workers required for level production and the resulting month-end inventories. Each worker can produce 15 units per day, and the desired ending inventory is 9000 units.

Month		1	2	3	4	Total
Working Days		20	24	12	19
Forecast Demand		28,000	27,500	28,500	28,500
Planned Production
Planned Inventory	11,250

QUESTION 4

A). What is a seasonal index? How is it calculated?

B). Using exponential smoothing, calculate the forecasts for months 2, 3, 4, 5, and 6. The smoothing constant is 0.2, and the old forecast for month 1 is 245.

Month	Actual Demand	Forecast Demand
1	260
2	230
3	225
4	245
5	250
6

C). Given the following average demand for each month, calculate the seasonal indices for each month.

Month	Average Demand	Seasonal Index
January	30
February	50
March	85
April	110
May	125
June	245
July	255
August	135
September	100
October	90
November	50
December	30
Total

D). Using the data in part A and the seasonal indices you have calculated, calculate expected monthly demand if the annual forecast is 2000 units.

Month	Seasonal Index	Forecast
January
February
March
April
May
June
July
August
September
October
November
December

QUESTION 5

A). What are inventories? Why are they important to manufacturing companies?

B). What is the difference between FIFO and LIFO?

C). Given the following data, calculate a level production plan, quarterly ending inventory, and average quarterly inventory. If inventory carrying costs are $6 per unit per quarter, what is the annual carrying cost? Opening and ending inventory are zero.

	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Totals $
Forecast Demand	5000	7000	8500	9500
Production
Ending Inventory
Average Inventory
Inventory Cost

If the company always carries 100 units of safety stock, what is the annual cost of carrying it?

D) Perform an ABC analysis on the following set of products.

Item	Annual Demand	Unit Cost
A211	800	$9
B390	100	$90
C003	450	$6
D100	400	$100
E707	85	$2,000
F660	250	$320
G473	500	$75
H921	100	$75