Question

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

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.

Business   Operations-Management   
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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

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