Question

2. The following table contains data about the inventory for five items at Jones Corporation. Complete the missing items in the table.

ITEM #	BEGINNING UNIT INVENTORY	ENDING UNIT INVENTORY	AVERAGE UNIT INVENTORY	ANNUAL UNIT SALES	INVENTIORY TURNOVER
1	150,000	120,000		400,000
2	40,000	60,000		80,000
3	85,000	97,000		190,000
4	200,000	170,000		350,000
5	50,000	60,000		165,00

TOTAL  

3. Suppose Jones Corporation in the above problem determined that its annual inventory carry cost = 18 percent. The item unit cost was as follows

Item 1 = $25.00

Item 2 = $ 60.00

Item 3 = $5.00

Item 4 = $10.00

Item 5 = $1.00

Compute the dollar values for the information in the above table and determine the annual inventory carrying cost for each item and the total annual inventory carrying cost.

4. Again, using the data Jones Corporation in problems 2 and 3, suppose Jones believes that in the upcoming year, the rate of sales expected for each of the five items is as follows.

Item 1 = 4,000 units per day

Item 2 = 2,000 units per day

Item 3 = 15,000 units per day

Item 4 = 7,000 units per day

Item 5 = 2,000 units per day

Compute the days of supply for each item.

Answer 1

ITEM #	BEGINNING UNIT INVENTORY	ENDING UNIT INVENTORY	AVERAGE UNIT INVENTORY	ANNUAL UNIT SALES	INVENTIORY TURNOVER
1	150,000	120,000	135000	400,000	2.963
2	40,000	60,000	50000	80,000	1.6
3	85,000	97,000	91000	190,000	2.088
4	200,000	170,000	185000	350,000	1.892
5	50,000	60,000	55000	165,000	3

average inventory is calculated as average of beginning and ending inventory

item 1 average inventory = (beginning + ending inventory)/2 = (150000+120000)/2 = 135000

similarly we calculate for all other items

inventory turnover = sales/average inventory

item 1 inventory turnover = 400000/135000 = 2.963

similarly for all other items. answers are given in table above.

3.

inventory cost = average inventory*inventory cost per unit

item 1 cost = 25, inventory cost per unit = 18%*25 = 4.5

total inventory cost = 4.5*135000 = 607500

item 2 cost = 60, inventory cost per unit = 18%*60 = 10.8

total inventory cost = 10.8*50000 = 540000

item 3 cost = 5, inventory cost per unit = 18%*5 = 0.9

total inventory cost = 0.9*91000 = 81900

item 4 cost = 10, inventory cost per unit = 18%*10 = 1.8

total inventory cost = 1.8*185000 = 333000

item 5 cost = 1, inventory cost per unit = 18%*1 = 0.18

total inventory cost = 0.18*55000 = 9900

total inventory carrying cost = 607500+540000+81900+333000+9900 = 1572300