Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 17, Problem 13QP
Summary Introduction
To determine: Whether the company’s inventory policy is optimal or not and its reason.
Introduction:
Inventory refers to a stock of unsold goods or products that are holding for sale. Balancing demand and supply is one of the major characteristics of maintaining inventory.
Economic order quantity (EOQ) refers to a model or tool designed for reducing the total costs (carrying costs and ordering costs) of the inventory.
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Students have asked these similar questions
Assume that Demand (D) = 10,000 units and Ordering Cost (S) = $10 (per order). Suppose that
we order at the Economic Order Quantity (EOQ) and the total inventory cost TC $500. What is
the EOQ?
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.
Annual
Item
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
1. When prices are rising (inflation), which costing method would produce the highest value
for gross margin? Choose between first-in, first-out (FIFO); last-in, first-out (LIFO); and
weighted average (AVG).
Evansville Company had the following transactions for the month.
Cost per Unit
$6,000
7,000
7,500
Number of Units
Purchase
2
Purchase
Purchase
4
Calculate the gross margin for each of the following cost allocation methods, assuming A62 sold
just one unit of these goods for $10,000. Provide your calculations.
A. first-in, first-out (FIFO)
B. last-in, first-out (LIFO)
C. weighted average (AVG)
Chapter 17 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 17.1 - Prob. 17.1ACQCh. 17.1 - Prob. 17.1BCQCh. 17.1 - Prob. 17.1CCQCh. 17.1 - Prob. 17.1DCQCh. 17.2 - Prob. 17.2ACQCh. 17.2 - Prob. 17.2BCQCh. 17.2 - Prob. 17.2CCQCh. 17.2 - Prob. 17.2DCQCh. 17.3 - Prob. 17.3ACQCh. 17.3 - Prob. 17.3BCQ
Ch. 17.3 - Prob. 17.3CCQCh. 17.4 - Prob. 17.4ACQCh. 17.4 - Prob. 17.4BCQCh. 17.4 - Prob. 17.4CCQCh. 17.5 - Prob. 17.5ACQCh. 17.5 - Prob. 17.5BCQCh. 17 - If a firm receives a check for 50,000, its...Ch. 17 - Prob. 17.2CCh. 17 - Prob. 17.3CCh. 17 - What are shortage costs?Ch. 17 - Prob. 17.5CCh. 17 - Prob. 1CTCRCh. 17 - Cash Management. What options are available to a...Ch. 17 - LO1 17.3Agency Issues. Are stockholders and...Ch. 17 - Prob. 4CTCRCh. 17 - Short-Term Investments. Why is a preferred stock...Ch. 17 - Prob. 6CTCRCh. 17 - Float. Suppose a firm has a book balance of 2...Ch. 17 - Prob. 8CTCRCh. 17 - Agency Issues. It is sometimes argued that excess...Ch. 17 - Use of Excess Cash. One option a firm usually has...Ch. 17 - Use of Excess Cash. Another option usually...Ch. 17 - Float. An unfortunately common practice goes like...Ch. 17 - Credit Instruments. Describe each of the...Ch. 17 - Trade Credit Forms. In what form is trade credit...Ch. 17 - Receivables Costs. What are the costs associated...Ch. 17 - Prob. 16CTCRCh. 17 - Credit Period Length. What are some of the factors...Ch. 17 - Credit Period Length. In each of the following...Ch. 17 - Prob. 19CTCRCh. 17 - Prob. 20CTCRCh. 17 - Calculating Float. You have 95,000 on deposit with...Ch. 17 - Prob. 2QPCh. 17 - Calculating Float. You have 26,500 on deposit with...Ch. 17 - Prob. 4QPCh. 17 - Prob. 5QPCh. 17 - Calculating Net Float. Each business day, on...Ch. 17 - Size of Accounts Receivable. Essence of Skunk...Ch. 17 - Prob. 8QPCh. 17 - Prob. 9QPCh. 17 - Size of Accounts Receivable. Two Doors Down, Inc.,...Ch. 17 - Prob. 11QPCh. 17 - Prob. 12QPCh. 17 - Prob. 13QPCh. 17 - Prob. 14QPCh. 17 - Prob. 15QPCh. 17 - Safety Stocks and Order Points. Sach, Inc.,...
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