The Fragrances Division of Consumer Cosmetics is expected to have an inventory of finished goods of...
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The Fragrances Division of Consumer Cosmetics is expected to have an inventory of finished goods of 5,000 litres of various products at the end of each accounting period. At the start of 2021, the division's inventory had a cost of $10 per litre, totalling $50,000. The division expects produc- tion cost per litre to remain constant during 2021. Sales for 2021 are bud- geted to be as follows: Quarter 1 Quarter 2 Quarter 3 Quarter 4 25,000 litres 40,000 litres 20,000 litres 15,000 litres The division also anticipates sales of 20,000 litres in the first quarter of 2022. Required (a) Based on the above information, prepare a production plan for the four quarters of 2021. (b) The company has decided to move toward a more efficient inven- tory management system. In 2021, it will start with an inventory of 5,000 litres, but at the end of each quarter the closing inventory will be planned as 10% of the following quarter's sales. Prepare a revised production plan for 2021. (c) The assistant procurement manager has just got back from an intensive training course. He is convinced that the company can operate on a pure just-in-time inventory management system. In 2021, the company will start the year with inventory of 5,000 litres, but from then on it will carry zero inventory of finished goods. Pre- pare a production plan for 2021. (d) What are the advantages and disadvantages of moving to a just-in- time inventory management system? The Fragrances Division of Consumer Cosmetics is expected to have an inventory of finished goods of 5,000 litres of various products at the end of each accounting period. At the start of 2021, the division's inventory had a cost of $10 per litre, totalling $50,000. The division expects produc- tion cost per litre to remain constant during 2021. Sales for 2021 are bud- geted to be as follows: Quarter 1 Quarter 2 Quarter 3 Quarter 4 25,000 litres 40,000 litres 20,000 litres 15,000 litres The division also anticipates sales of 20,000 litres in the first quarter of 2022. Required (a) Based on the above information, prepare a production plan for the four quarters of 2021. (b) The company has decided to move toward a more efficient inven- tory management system. In 2021, it will start with an inventory of 5,000 litres, but at the end of each quarter the closing inventory will be planned as 10% of the following quarter's sales. Prepare a revised production plan for 2021. (c) The assistant procurement manager has just got back from an intensive training course. He is convinced that the company can operate on a pure just-in-time inventory management system. In 2021, the company will start the year with inventory of 5,000 litres, but from then on it will carry zero inventory of finished goods. Pre- pare a production plan for 2021. (d) What are the advantages and disadvantages of moving to a just-in- time inventory management system?
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Financial Accounting A User Perspective
ISBN: 978-0470676608
6th Canadian Edition
Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry
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