Determine the annual holding cost, Cost Accounting

Assignment Help:

A company produces three types of items. A single machine is used to produce the three items on a cyclical basis. The company has the policy that every item is produced once during each cycle, and it wants to determine the number of production cycles per year that will minimize the sum of holding and setup costs (no shortages allowed). The following data are given:

Pi = number of units of product i that could be produced per year if the machine were entirely devoted to producing product i

Di = annual demand for product i

Ki = cost of setting up production for product i

hi = cost of holding one unit of product i in inventory for one year

a. Suppose there are N cycles per year. Assuming that during each cycle, a fraction 1/N of all demand for each product is met, determine the annual holding cost and the annual setup cost.

b. Let qi* be the number of units of product i produced during each cycle. Determine the optimal value of N (call it N*) and qi*.

c. Let EROQi be the optimal production run size for product i if the cyclical nature of the problem is ignored. Suppose qi* is much smaller than EROQi. What conclusion could be drawn?

d. Under certain circumstances, it might not be desirable to produce every item during each cycle. Explain which of the following factors would tend to make it undesirable to produce product i during each cycle:

i) Demand is relatively low.

ii) The setup cost is relatively high.

iii) The holding cost is relatively high.


Related Discussions:- Determine the annual holding cost

Estimate cost of financing, Calculate the equal monthly payments and the co...

Calculate the equal monthly payments and the cost of financing on a 10-year mortgage. The cash value of the house today is $500,000. You are paying monthly at a fixed rate of 6% pe

Marginal costing, MARGINAL COSTING As per the Chartered Institute of Ma...

MARGINAL COSTING As per the Chartered Institute of Management Accountants, London, the phrase 'Marginal cost' means - 'the amount at every given volume of output through which

Limitations of cost accounting, LIMITATIONS OF COST ACCOUNTING Cost Acc...

LIMITATIONS OF COST ACCOUNTING Cost Accounting similar to additional branches of accountancy is not an precise science although is an art which was developed throughout theorie

First in first out or fifo, First in First Out or FIFO FIFO method is ...

First in First Out or FIFO FIFO method is based upon the assumption such stock purchased first is issued first. Prices of stock purchased first are employed to determine the v

Prepare an income statement for the current year, The assets and liabilitie...

The assets and liabilities of Amos Moving Services at May 31, 2011, the end of the current year, and its revenue and expenses for the year are listed below.  On April 1, 2010, the

Management Acconting, what is the different between Financial accounting an...

what is the different between Financial accounting and management accounting?

Corporate accounting systems, Using the  information provided prepare  the ...

Using the  information provided prepare  the four financial  statements  for inclusion in Plantagenet Ltd's Annual Report dated at its balance date of 30th June 2011. The statement

What is the marginal cost, Marginal Cost (MC): The marginal cost of an a...

Marginal Cost (MC): The marginal cost of an additional unit of output is the cost of the additional inputs required to make that output. More formally, the marginal cost is the

Find the amount capitalized for the patent account, Gomez incurred $350,000...

Gomez incurred $350,000 of research and development costs to develop a product for which a patent was granted on January 2, 2008. Legal fees and other costs associated with the re

Activity based costing, As controller for Edmonton Cosmetic Hospital, you a...

As controller for Edmonton Cosmetic Hospital, you are looking into the possibility of utilizing Activity- Based-Costing to assign overhead costs to patient surgeries. As a first st

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd