Aero Dynamics Corporation manufactures certain electronic products for the aviation industry. products industry. In 2018, the company's

Aero Dynamics Corporation manufactures certain electronic products for the aviation industry.  

Transcribed Image Text:

products industry. In 2018, the company's management was reviewing the inventory policy for YM-10, on of the electronic chips used in the production process. The chip is procured in small cans for £100 each can. The firm uses 4,800 cans per year. An activity cost analysis revealed that placing an orde entails significant administrative costs. These costs include cost of raising purchase requisition of £1 per order; getting a quote from three suppliers costing £15, placing an order costing £5, inspecting and recording an incoming order against specifications on purchase order costing £20. The driver fo all these costs was believed to be number of orders. In addition, shipping cost for each order of YM 10 borne by Aero Dynamics was £100 per order. The current applicable interest rate on financing inventory is 3%. The only other relevant holding cost was believed to be insurance cost of 1% pe year. viatio products industry. In 2018, the company's management was reviewing the inventory policy for YM-10, on of the electronic chips used in the production process. The chip is procured in small cans for £100 each can. The firm uses 4,800 cans per year. An activity cost analysis revealed that placing an orde entails significant administrative costs. These costs include cost of raising purchase requisition of £1 per order; getting a quote from three suppliers costing £15, placing an order costing £5, inspecting and recording an incoming order against specifications on purchase order costing £20. The driver fo all these costs was believed to be number of orders. In addition, shipping cost for each order of YM 10 borne by Aero Dynamics was £100 per order. The current applicable interest rate on financing inventory is 3%. The only other relevant holding cost was believed to be insurance cost of 1% pe year. viatio

Answer rating: 100% (QA)

1 Computation of Ordering Cost Raisiing Purchase Requisition 10 GBP Add Cost of getting ... View the full answer