The southern division manager of texcaliber, inc. is growing concerned that the division will not be able to meet its current period income objectives. the division uses absorption costing for internal profit reporting and had an appropriate level of inventory at the beginning of the period. the division manager knows that he can boost profits by increasing production at the end of the period. unfortunately, it is unlikely that the additional production will be sold, resulting in a larger ending inventory balance. the division manager has come to aston melon, the division controller, to determine exactly how much additional production is needed to increase income enough to meet the division’s profit objectives. aston analyzes the data and determines that the division will need to increase inventory by 30% in order to meet the division’s income objectives. aston reports this information to the division manager.
1. is aston acting ethically?
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Ответ:
Aston has given the information required to meet division profit objective. Increasing the profit objective is common goal of every manager. Here manager wanted to meet profit objective by minimising fixed cost which is not wrong motive. Whether the excess production can be sold in the market. If there is a chance to sell, more production can be made.
Absorption costing means that all of manufacturing costs are absorbed by units produced. It calculates every cost on no. of units produced but it does not mean to increase production only in order to match income objective or to reach this goal instead of fact that inventory remains at end, and sale of that increased production does not take place and income objective met because of the lower cost per unit.
Ответ:
(a) 1,078.12 copies
(b) 6.68 runs per year
(c) 37.43 days
(d) 10.78 days
(e) 767.62 copies
(f) $2,003.48
(g) 432 copies
Explanation:
Given that,
Annual demand (D) = 7200 copies
Cost of the book (C) = $14.50
Holding cost (H) = 18% of cost of book = 18% of $14.50
= $2.61
Setup costs (S) = $150
Annual production volume = 25,000 copies
Number of working days = 250
Lead time (L) = 15 days
Daily demand (d) = Annual demand ÷ Number of working days
= 7200 ÷ 250
= 28.8 copies
Daily production (p) = Annual production ÷ Number of working days
= 25000 ÷ 250
= 100 copies
(a) Minimum cost production lot size (Q):
Q = 1,078.12 copies
(b) Number of production runs:
= Annual demand (D) ÷ Production quantity (Q)
= 7,200 ÷ 1,078.12
= 6.68 runs per year
(c) Cycle time:
= Production quantity (Q) ÷ Daily demand (d)
= 1,078.12 ÷ 28.8
= 37.43 days
(d) Length of a production run:
= Production quantity (Q) ÷ Daily production (p)
= 1,078.12 ÷ 100
= 10.78 days
(e) Maximum inventory (Imax):
= Q × (1 - d÷p)
= 1,078.12 × (1 - 28.8 ÷ 100)
= 767.62 copies
(f) Total annual cost:
= Annual holding cost + Annual setup cost
= [(Q ÷ 2) × H × (1 - d÷ p)] + [(D ÷ Q) × S]
= [(1,078.12 ÷ 2) × $2.61 × (1 - 28.8 ÷ 100)] + [(7,200 ÷ 1,078.12) × $150]
= $1,001.74 + $1,001.74
= $2,003.48
(g) Reorder point:
= Daily demand × Lead time
= 28.8 × 15
= 432 copies