Presented options for this inquiry include: a. franchises; b. licenses globally; c. pays governments to market; d. contract manufactures. The right choice is d. contract manufactures. A contract manufacturer (CM) specializes in producing goods for a client based on specific requirements. Generally, these products are branded and appear as if they were made by the client rather than the CM. This relationship is advantageous for both parties, as clients save significantly on production and operational costs, while the manufacturers benefit from a consistent workload. Under such outsourcing arrangements, the manufacturer supplies all necessary facilities, materials, and labor for the client's product line.
Response:
a. Based on the company’s accounting records, the net operating income for product D14E is: (Net losses should be indicated with a negative sign.)
b. Evaluating the financial impact of discontinuing product D14E: It would lead to a financial disadvantage of -$68,000, so the product should remain in production as its losses would otherwise rise
- The financial summary is:
total sales $670,000
- variable expenses $295,000
- fixed manufacturing expenses $246,000
- fixed selling and administrative expenses $194,000
net loss = $65,000
If product D14E were to be cut, $196,000 + $111,000 = $307,000 of fixed expenses could be avoided, but $133,000 would still remain unavoidable. Discontinuing the product would increase losses by $133,000 - $65,000 = $68,000
She incorporates humor but ultimately illustrates that the situation is not genuinely humorous.
Answer:
(e) $3,873
(f) 200 units
Explanation:
(e)
Total carrying expenses:
= Average Inventory × carrying cost per unit
= 38.73 × 50
= $1,936.5
Annual order costs:
= Optimal number of orders each year × Cost per order
= 64.55 × 30
= $1,936.5
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Therefore,
Total Cost:
= Annual Ordering Cost + Annual Holding cost
= ($1,936.5 + $1,936.5)
= $3,873
Consequently, the yearly total inventory cost amounts to $3,873.
(f) Reorder Point:
= Average Daily Sales × Delivery lead time
= (Annual demand ÷ Working days per year) × Delivery lead time
= (5,000 ÷ 250) × 10
= 200 Units
Thus, the reorder threshold is set at 200 units.
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