ACC 227 ACC227 Module 5 Homework Assignment Solution (AAU Online)

ACC 227 ACC227 Module 5 Homework Assignment Solution (AAU Online)

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Part I: Short Response

1.How does the work-in-process inventory in a manufacturing organization differ from that in a service organization?

2.What is represented by total cost of goods manufactured?

3.What is inventory shrinkage?  Name three things that can cause inventory shrinkage.

4.What are the advantages of purchasing inventory in large quantities?  What are the advantages of purchasing it in small quantities?

5.What concerns might investors have when they observe changing levels of inventory on the balance sheet?

6.Using the following annual information, calculate inventory turnover for (1) raw materials inventory, (2) work-in-process inventory, and (3) finished goods inventory.

7.Pratt Company had an average of $160,000 worth of a certain product in inventory from September 1 to December 31.  If Pratt's cost of capital is 16%, what is the financial holding cost of this inventory?

8.Wilson Company sells 130 units daily.  Each time Wilson orders more units, the supplier takes four days to deliver the inventory.  What is Wilson’s reorder point (in number of units)?

9.Refer to the data in Problem 8.  The supplier may take five days to deliver the inventory if any unexpected event occurs and the daily demand for inventory may also spike to 160 units.  Compute the amount of safety stock the company should keep on hand in case both of these events should happen.

10.You have just finished preparing the management accounting report below for your division.  You are very pleased with the performance of your division and show your report to the division president, Karen.  Karen does not understand what some of the costs are and why they are in the report.  Respond to her questions listed below.

Part II: Application

1.Exercise 20-12 “Inventory Turnover in a Manufacturing Company” (p. 1050)

2.Exercise 20-13 “Inventory Turnover in a Merchandising Company” (p. 1050)

3.Problem 20-23 “Inventory Turnover in a Manufacturing Company” (p. 1053)


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