TOPIC: INVENTORY MANAGEMENT

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Problem 1

The following data are taken from the records of Chikoy Corporation for the year 200A:

Sales P P25,200,000

Cost of Sales P14,400,000

Inventory Turnover 9 times per year

For 200B, budgeted sales and cost of sales are the same as in 200A actual data, although the Company will try to increase its inventory turnover to 12 times per year. If short-term interest rates are expected to average at 8%, what is the Company's expected savings due to the increase in inventory turnover?

a.P400,000b. P700,000c. P32,000d. P56,000

Problem 2

The following information is available for Edgar Corporation's Material D

Annual Usage 12,600 units

Working days per year360 days

Normal Lead Time 20 days

The units of Material D are required evenly throughout the year.

What is the re-order point?

a.35 unitsb. 20dayc. 700 unitsd. 630 units

Assuming that occasionally, the Company experiences delay in the delivery of Material D, such that the lead time reaches a maximum of 30 days, how many units of safety stock should the company maintain and what is the reorder point?

Safety StockRe-order Point

a.350 1,050

b.350 700

c.0 1,050

d.1,050 700