This business/management problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
ScanSolve AI Answer
Here are the calculations for the inventory levels and production costs: Inventory Levels Given Data: Average usage = 200 units per day Maximum usage = 280 units per day Minimum usage = 120 units per day Lead time = 20 – 26 days (Minimum lead time = 20 days, Maximum lead time = 26 days) EOQ = 6000 units Calculations: iv. Reorder level Step 1: The formula for Reorder Level is Maximum Usage multiplied by Maximum Lead Time. Reorder Level = Maximum Usage × Maximum Lead Time Step 2: Substitute the given values into the formula. Reorder Level = 280 units/day × 26 days Step 3: Calculate the Reorder Level. Reorder Level = 7280 units The reorder level is 7280 units. v. Minimum level Step 1: The formula for Minimum Level is Reorder Level minus (Average Usage multiplied by Average Lead Time). Minimum Level = Reorder Level - (Average Usage × Average Lead Time) Step 2: Calculate the Average Lead Time. Average Lead Time = 20 days + 26 days2 = 23 days Step 3: Substitute the values into the Minimum Level formula. Minimum Level = 7280 units - (200 units/day × 23 days) Step 4: Calculate the Minimum Level. Minimum Level = 7280 units - 4600 units Minimum Level = 2680 units The minimum level is 2680 units. vi. Maximum level Step 1: The formula for Maximum Level is Reorder Level plus EOQ minus (Minimum Usage multiplied by Minimum Lead Time). Maximum Level = Reorder Level + EOQ - (Minimum Usage × Minimum Lead Time) Step 2: Substitute the values into the Maximum Level formula. Maximum Level = 7280 units + 6000 units - (120 units/day × 20 days) Step 3: Calculate the Maximum Level. Maximum Level = 7280 units + 6000 units - 2400 units Maximum Level = 13280 units - 2400 units Maximum Level = 10880 units The maximum level is 10880 units. --- Cost Calculations Given Data: Variable overhead = N8,000 Fixed overhead = N9,300 Direct materials cost = N12,000 Direct labour cost = N9,000 Output for the month = 3000 units Calculations: c. Prime cost per unit Step 1: Calculate the total Prime Cost. Prime Cost = Direct Materials Cost + Direct Labour Cost Prime Cost = N12,000 + N9,000 Prime Cost = N21,000 Step 2: Calculate the Prime Cost per unit. Prime Cost per Unit = Prime CostOutput for the Month Prime Cost per Unit = N21,0003000 units Prime Cost per Unit = N7 per unit The prime cost per unit is N7. d. The production cost per unit Step 1: Calculate the total Production Cost. Production Cost = Prime Cost + Variable Overhead + Fixed Overhead Production Cost = N21,000 + N8,000 + N9,300 Production Cost = N38,300 Step 2: Calculate the Production Cost per unit. Production Cost per Unit = Production CostOutput for the Month Production Cost per Unit = N38,3003000 units Production Cost per Unit ≈ N12.77 per unit The production cost per unit is N12.77. That's 2 down. 3 left today — send the next one.