HOMEWORKQuestion #1a) Under which inventory costing method would managers have an incentive to build...

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HOMEWORKQuestion #1a) Under which inventory costing method would managers have an incentive to build excess inventory? Be sure to justify your answer.b) What can a manager do to reduce the incentive to build excess inventory? Be specific!Question #2a) What role does the choice of capacity level impact income reported under variable costing? Be specific!b) What role does the choice of capacity level impact income reported under full absorption costing? Be specific!Question #3A firm expects to sell 10,000 units of its product annually. It estimates that it costs $200 to place an order and that each unit costs $7 annually to carry in inventory. It takes 7 days to receive an order once it is placed, and the store is open 365 days per year.a) How many units should the firm order at a time if it wants to minimize the sum of ordering and carrying costs?b) How many orders will it place in a year?c) What will its average inventory level be during the year?d) What is its reorder point?Question #4If a firm decides to implement a JIT inventory system, list and describe five metrics (measures) that the firm should begin tracking to assess the JIT system.
	
Document Preview: HOMEWORKQuestion #1a) Under which inventory costing method would managers have an incentive to build excess inventory? Be sure to justify your answer. b) What can a manager do to reduce the incentive to build excess inventory? Be specific! Question #2a) What role does the choice of capacity level impact income reported under variable costing? Be specific!b) What role does the choice of capacity level impact income reported under full absorption costing? Be specific!Question #3A firm expects to sell 10,000 units of its product annually. It estimates that it costs $200 to place an order and that each unit costs $7 annually to carry in inventory. It takes 7 days to receive an order once it is placed, and the store is open 365 days per year. a) How many units should the firm order at a time if it wants to minimize the sum of ordering and carrying costs?b) How many orders will it place in a year?c) What will its average inventory level be during the year?d) What is its reorder point?Question #4If a firm decides to implement a JIT inventory system, list and describe five metrics (measures) that the firm should begin tracking to assess the JIT system.

David · Accepted Answer

HOMEWORK
Question #1
a) Under which inventory costing method would managers have an incentive to build excess inventory? Be sure to justify your answer. 
Under Absorption costing method, the variable and fixed cost is allocated to the units produced. Hence, these both costs become part of inventory costs. Therefore, the more is the inventory, less is per unit cost. 
Hence, the Managers have an incentive to build excess inventory, because with less per unit cost, the net operating income of the company will increase. The performance of the company will show better results. And the performance of Managers will be appreciated.  
b) What can a manager do to reduce the incentive to build excess inventory? Be specific! 
The company can have proper system to control the inventory. They keep strict control over the units manufactured and the sales targets. Proper production budget is prepared, and the raw material is also issued as per the production plan. This system ensures that production is undertaken only for the units required as per the plan.

HOMEWORK Question #1 a) Under which inventory costing method would managers have an incentive to build excess inventory? Be sure to justify your answer. b) What can a manager do to reduce the...

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