Coastal Cabinets produces cabinets for new home builders. You have been called in to settle a dispute
Question:
Executive Homes buys 20,000 units of a particular cabinet from Coastal Cabinets every year. It insists that Coastal keep a one-month inventory to accommodate fluctuations in Executive’s demand. Coastal does not want to keep any inventory and says that Executive Homes should buy components in advance and store them.
You determine that the inventory storage costs per unit are $50 at Coastal and $125 at Executive Homes.
Required
How do you suggest the two companies settle their dispute?
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Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0078025525
4th edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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