Question 1 Laird Company uses 405 units of a part each year. The cost of placing

Question

Question 1

Laird Company uses 405 units of a part each year. The cost of placing one order is $5; the cost of carrying one unit in inventory for a year is $2. Laird currently orders 81 units at a time.

Required:

A. The annual ordering cost of Laird's current policy is $

B. The annual carrying cost of Laird's current policy is $

C. The total cost of Laird's current policy is $

D. What is the economic order quantity (EOQ) for Laird?

E. What is the total inventory-related cost at the EOQ?
$

Question 2

During the most recent year, Boston Corp. had the following data:

Required:

A. How many units are in ending inventory?
units

B. Using absorption costing, calculate the per-unit product cost.
$

What is the value of ending inventory?

C. Using variable costing, calculate the per-unit product cost.
$

What is the value of ending inventory?

D. Prepare an income statement using absorption costing.

E. Prepare an income statement using variable costing.

Beginning inventory in units -     Units produced 15,400 Units sold ($125 per unit) 8,200 Variable costs per unit: Direct materials $13 Direct labor $16 Variable overhead $8 Fixed costs: Fixed overhead per unit produced $23 Fixed selling and administrative $185,000

Explanation / Answer

A.Annual ordering cost = (405/81)$5 = $25

B.Annual carrying cost = (81/2)$2 = $81

C.Total cost of Laird's current policy = $25 + $81= $106

D.EOQ = [(2405$5)/2] = 45

E.Total inventory-related cost = ($59) + [(45/2)$2] = $90

Beginning units + units produced -units sold

7,200 unit

Direct materials                                       $13

Direct labor                                             $16

Variable overhead                                     $8

Fixed overhead per unit produced          $23

Total product cost                                  $60

Ending inventory value=$60*7200

                                     =$432,000

Direct materials                                       $13

Direct labor                                             $16

Variable overhead                                     $8

Total product cost                                  $37

Ending inventory value=$37*7200

                                     =$266,400

                             Boston Corp

                 .Absorption-Costing Income Statement

                         For the Most Recent Year

Sales                                                          1,025,000

Less: Cost of goods sold                             492,000

Gross                                                            533,000

Less: Selling and administrative expenses 185,000

Operating income                                         348,000

                                               Boston Corp.

                                   Variable-Costing Income Statement

                                       For the Most Recent Year

Sales                                                                     1,025,000

Less: Cost of goods sold                                          303,400

Gross margin                                                            721,600

Less: fixed expenses:

Overhead                                                 354,200

Selling and administrative expenses       185,000

                                                                                   539,200

Operating income                                                      182,400

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