Reader's Digest Association, Inc., has published Reader's Digest magazine for over 80 years, and many believe the publication is dated and can no longer attract many readers. They believe _____ plans are needed to revamp the magazine's content, editorial staff, and readership.

Answer:

(1) 1,400 units

(2) $21,000

Explanation:

Given that,

Selling price = $15 per unit

Variable expense = $12 per unit

Fixed expense = $4,200

Contribution margin per unit:

= Selling price - Variable expense

= $15 - $12

= $3

Contribution margin ratio :

= Contribution margin per unit ÷ Selling price per unit

= $3  ÷ $15

= 0.2 or 20%

1. Break even point:

= Fixed expense ÷ Contribution margin per unit

= $4,200 ÷ $3

= 1,400 units

2. Break even point in dollar sales:

= Fixed expenses ÷ Contribution margin ratio

= $4,200 ÷ 20%

= $21,000

Answer:

c.free equipment and training.

Explanation:

A franchise is when a company gives another party the right to use its name and brand to do business. The franchisor provides loscence that covers it's procedures, know how, intellectual property, brand, business model, and rights to sell its products.

The franchisor provides expertise which includes site recommendations, name recognition, accounting and management support. To ensure uniformity of brand it also gives building specifications and designs.

Three payments are made by the franchisee to the franchisor:

- Payment for trademark

- Reimbursement for training and advisory services performed

- An agreed part of sales made

Final answer:

The maximum amount the firm should be willing to invest in the project is $3,682.75 to accept this project.

Explanation:

The maximum amount that the firm should be willing to invest in the project can be calculated using the present value formula. The formula is PV = CF / (1 + r)^n, where PV is the present value, CF is the cash flow, r is the required return, and n is the number of periods. In this case, CF is $10,000 per year for 10 years, r is 12.05% compounded monthly, and n is 10.

First, we need to convert the required return to a monthly rate. We divide 12.05% by 12 to get 1.0042% monthly rate. Next, we plug the values into the formula:

PV = $10,000 / (1 + 0.010042)¹²⁰

PV = $10,000 / (2.7136)

PV = $3,682.75

Therefore, the maximum amount the firm should be willing to invest in the project is $3,682.75 to accept this project.

Answer:

b. companies can use accounting methods that minimize net income for tax purposes and other methods that maximize net income for reporting to shareholders.

As they use a basis for accounting and prepare the financial statement temporary difference arise which, are settled overtime as in the end both, tax basis and accounting basis much get the same income

The most common example is depreciation if a company uses S179 and depreciate the entire of the asset purchase next year, while the accounting will have a depreciation expense associate with the equipment for tax purposes this assets basis is zero as it was completely depreciate thus, it will have a higher income making more tax payable than accounting income tax expense.

Explanation:

a. corporations often make errors in their tax estimations.

While this can occur is not the reason for deferred income taxes

c. the IRS owes a company a refund from last year.

No, the refund will not generate deferrd income tax It will be a receivable for the company.

d. large corporations generally have operations in foreign countries whose tax law is quite different from U.S. tax

While corporations do operate in foreing countries these doesn't necessary generate deferred taxes. Difference arise when the company uses a different method in his accounting than the State to determinate the tax basis.

Answer:

At July 1, 2020 the equipment is impaired. The impairment loss is $20000

Journal

Impairment loss - Equipment $ 20000 (debit), Accumulated impairment loss $20000 (credit)

Explanation:

Impairment loss is recognized when the Recoverable Value of an asset is less than the Carrying Amount of the of an asset.

Recoverable Value of the Equipment

The Recoverable Value of Equipment is the Higher of :

    1. Value in use of the equipment

Value in use is the Present Value of future cash flows to be obtained from the asset (through use and disposal of asset at the end of its useful life).

Zeibart estimates $125000 from use of equipment.Thus Value in use is $125000

   2. Fair Value less of disposal

Fair value is the amount obtained on sale of the equipment in an orderly market transaction

Fair Value on July 1 2020 is $90000

Therefore the recoverable amount is $ 125000 (Value in use) which is higher.

Carrying Amount of the Equipment

Carrying Amount of the Equipment is Cost Less Accumulated Depreciation and Previous Impairment losses.

Cost = $225000

Accumulated Depreciation

Depreciation per year = ($225000-$25000)/10 = $20000

Depreciation July 1, 2016 to July 1, 2020 = $20000 × 4 YEARS = $80000

Accumulated depreciation up to July 1, 2020 is thus $80000

Carrying Amount of the Equipment is$145000 ($225000 - $80000)

Impairment Test

Carrying Amount $ 145000 > Recoverable Amount $ 125000

Therefore the equipment is impaired.

Impairment loss is $ 145000 - $1250000 = $ 20000

Answer:

The triple bottom line according to John Elkington in 1994 is an accounting reporting framework which considers three aspects: social, environmental (or ecological) and financial.

Explanation:

What practices at Theo Chocolate reflect the concept of sustainability?

Sustainability according to the proponents of the triple bottom line reporting is to ''take into consideration social and environmental factors and record the company's performance in addition to financial performance.''

In line with above definition, Theo Chocolate reflect the concept of sustainability as because the company utilizes organic beans in the manufacturing of chocolate. Organic beans are socially sustainable because they are health inclined.

What does vice president Debra Music mean when she says that Theo is a ""triple bottom line"" company?

The triple bottom line according to John Elkington in 1994 is an accounting reporting framework which considers three aspects: social, environmental (or ecological) and financial.

Therefore a Triple Bottom Line company like Theo considers social equity, economic, and environmental factors. The phrase, "people, planet, and profit" summarizes the description and meaning of being a triple bottom line company with the goal of TBL being sustainability

How is this different from any other company?

Usually other companies would only report or be concerned about financial performance which is Profit, without considering People or Planet. Such will ignore and not achieve sustainability.

What does the term fair trade mean to the leaders at Theo?

Fair Trade is a way of buying and selling products that makes certain that the people who produce the goods receive a fair price

What happens if fair trade goals conflict with a company’s primary responsibility to be profitable?

Theo chocolate is a triple bottom line - sustainability minded company that will not compromise ethics for profitability, it would prefer to trade fairly and make a loss than to deal unethically and become profitable

Answer:

remains unchanged because it was counted when your parents earned it.

Explanation:

GDP is the total value of goods & services produced within an economy, during a period of time.

It can be recorded by following methods : Value Added (by each producer) , expenditure (by all consumers), income (of all producers) .

There are many precautions while calculating GDP : Gifts, Second Hand goods etc are not included in GDP. Such because these goods have not lead to any new flow of goods & services in economy, the transaction includes mere transfer of ownership. These goods & services had already been included in 'GDP' at time of purchase under expenditure or income method & need not be included at time of gift giving or second hand purchase. If included again, it leads to double counting.

Similarly : Parents surprise gift doesn't affect GDP as it has already been accommodated in it while parents had earned it.

Answer:

(a) $90,180

(b) $94,560

Explanation:

Given that,

Sales in the first quarter = $201,000

Sales in the second quarter = $242,000

Variable overhead = 18% of sales

Fixed overhead costs = $54,000 per quarter

Budgeted manufacturing overhead for 1st Quarter:

= Variable overhead + Fixed overhead costs

= ($201,000 × 18%) + $54,000

= $36,180 + $54,000

= $90,180

Budgeted manufacturing overhead for 2nd Quarter:

= Variable overhead + Fixed overhead costs

= ($242,000 × 18%) + $54,000

= $43,560 + $51,000

= $94,560

Answer:

Susan qualifies for the loan under section 403(b) plan at work. However, this loan should be well negotiated as regards repayment of the interest elements and the principal.

Explanation:

When a loan is taken up, one has invariably taken up the pledge to repay the Principal component and the Interest element. At the point of funding the loan, a good and favorable interest rate should be well negotiated. As an active employee, the repayment is taken from the monthly pay, after the deduction of statutory tax payment.

It must be advised that Susan should pursue the intention of applying for the loan with utmost faithfulness, as a deviation from this will be frowned upon. Such loan are not to be invested and/or diverted for other purposes.

Susan should properly understand the attending obligation before her - the repayment of principal and interest within the agreed period of time. A default is not advised as this comes with a penalties. The entirety of the loan may be treated as an income, and subsequently taxed in same breath. Plus other penalties.

Answer:

4. Cash receipts and disbursements

Explanation:

The cash budget is the budget which shows a movement of cash that results in an increase and decrease in the balance of the cash.  

The cash inflow or cash receipts increase the cash balance so it would be added while the cash outflow or cash disbursements decrease the cash balance.  

It only includes the cash receipts and the disbursements

The other options do not come in the cash budget. Hence, ignored it

Cash receipts and disbursements are the items that appear on a cash budget, as it tracks actual cash flows excluding non-cash items like depreciation and bad debt expenses.

The item that appears on a cash budget is cash receipts and disbursements. A cash budget focuses on the actual cash flow of an organization, tracking the inflow and outflow of cash. It does not include depreciation, bad debt expenses, or noncash items because these items do not reflect actual cash transactions. Depreciation is an allocation of the cost of an asset over its useful life and does not involve a cash transfer. Similar to depreciation, bad debt expenses and noncash items affect an organization's profitability on paper, but not its cash holdings.

Answer:

The correct answer is letter "A": provide diversification. Shareholders assume all of the risk associated with the mutual fund.

Explanation:

Mutual funds are pools of assets that allow small investors to have a diversified portfolio which reduces risks in their investments. Mutual funds are typically managed by professionals who charge a high fee for their services which reduces the investors' net profit.

Even if mutual funds are managed by professionals, it does not guarantee investors will end up with earnings and, in front of losses, investors assume the whole risk.

Answer:

$948,760

Explanation:

The computation of the economic value added (EVA) is shown below:

= Operating income after taxes - carrying amount of debt and equity after considering the firm's weighted-average cost of capital

where,

Operating income after taxes equal to

= $2,400,000 × (1 -30%)

= $1,680,000

Cost of debt and equity is

= ($1,300,000 + $8,800,000) × 7.24%

= $731,240

So, the economic value added is

= $1,680,000 - $731,240

= $948,760

Answer: Participatory leadership

Explanation:

Participatory leadership was considered a controversial and tedious way to lead the troops. The old view of leadership was the hierarchal which was style based on hierarchy, then participatory leadership was not common.

Overtime, due to problems encountered within the corporate sphere and after the reduction in customers trust, participatory leadership is now more popular. It is the style that encourages employees to give their ideas and inputs in the company's decision making. The staff gives useful information on company issues.

Option C

employees who are independent is not an indication of a company environment ripe for unethical behavior

Explanation:

In business knowledge, environmental ethics is regarded with a company's efficiency to defend the environment in which it functions. Breaches of basic ethics can harm your business or take your company money due to acts such as claims or deprivation of goods and ideas.

Unethical practices cover not rewarding workers a decent wage, hazardous or unsanitary functioning conditions. Any disciplines that are not in acquiescence with good labor standards and federal manipulation guidelines befall into this category. Providing independence to the employee is not unethical behavior.

Answer:

Cost of goods sold is $ 75.900

Explanation:

Cost of goods sold = Opening Inventory + Net Purchases - Closing Inventory

Opening Inventory                                                              $ 9,000

Purchases                                 $ 90,000

Less: Purchase returns            $( 6,500)

Add: Freight In                         $   1,200

Net purchases                                                                    $ 84,700

Cost of goods available for sale                                       $ 93,700

Less: Closing Inventory                                                     $ (17,800)

Cost of goods sold                                                            $ 75,900

Upper Y's cost of goods sold for the year is calculated by adding the beginning inventory, net purchases, and freight charges to find the cost of goods available for sale, then subtracting the year-end inventory. The total comes to $75,900.

The cost of goods sold for Upper Y can be calculated by first determining the cost of goods available for sale, and then subtracting the ending inventory. The cost of goods available for sale includes the beginning inventory, the cost of goods purchased, and any additional costs incurred for the merchandise.

Firstly, we calculate the net purchases which is the original purchase price subtracting any returns, giving us $90,000 - $6,500 = $83,500.

By adding the value of the net purchases to the merchandise inventory at the beginning of the year and the freight charges, we would get the cost of goods available for sale which is $9,000+ $83,500 + $1,200 = $93,700.

The cost of goods sold is then calculated by subtracting the ending inventory from the cost of goods available for sale, giving us $93,700 - $17,800 = $75,900.

So, Upper Y's cost of goods sold for the year is $75,900.

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Answer:

$79,400

Explanation:

The Net Cash Provided income can be calculated as follows:

Net income                        63000

Depreciation                         4700    

Expense                                                

Decrease in A/C

receivables                           7600        +

Increase in account

payable                                  4100                                                        

Net Cash Provided:             79,400                                                      

Answer: B) 22 percent of respondents think the crisis will have a negative impact on CSR

Explanation:

Answer:

A. 35% of respondents think CSR has become victim of its own hype

Explanation:

The journal entry is shown below:

Bond payable $440,000

Premium on bond payable  $7,400

           To Preferred stock $440,000

           To Paid in excess of par - Preferred stock $7,400

(Being the conversion is recorded)

The computation is shown below:

For preferred stock

= $440,000 ÷ $1,000 × 20 shares × $50

= $7,400

Answer and Explanation:

Liquidating distribution in the problem are made in accordance to the preferred stock.since the activity may not meet the section 322 requirement,the section 322 rules will not apply to the case cited in the problem.This means parents has to recognize a capital loss of $50,000 on the distribution,the capital loss can only be used to offset capital gains.

Under the section 165(g)(3) rules for affiliated cooperation's worthlessness securities,parents can recognize an ordinary loss of $500,000 on the common stock.The ordinary loss can be sued to offset ordinary income.

Explanation of the losses on Parent's preferred and common stock in a liquidation scenario.

Parent's Loss on Preferred Stock: The loss is calculated as the excess of the adjusted basis of the stock over the amount received upon liquidation. In this case, Parent's loss on the preferred stock would be $50,000.

Parent's Loss on Common Stock: Since the common stock receives distribution only after the creditors and preferred stockholders are paid, and there are no remaining funds, Parent's loss on the common stock would be the adjusted basis of $500,000.

Answer:

The deductible expense  =  $570

Explanation:

First, the question is not complete, the complete question is as follows

Gwen, an independent consultant, traveled to New York City on a business trip. Gwen spent 4 days in business meetings and conferences and then spent 2 days sightseeing in the area. Gwen's plane fare for the trip was $250. Meals cost $160 per day. Hotels and other incidental expenses amounted to $250 per day.Gwen was not reimbursed by her employer for any expenses. Her AGI for the year is $50,000 and she itemizes but has no other miscellaneous itemized deductions. Gwen may deduct (after limitations).

Solution

How much is the plane fare              $250

How much was spent on means       $640 (160 a day x 4 days)

Subtract: 50% of meal costs               ($320) 0.5 x 640

Hotel Expense was                              $1,000 ($250 x 4 days)

The total is                                            $1,570

Subtract 2% of the AGI                       $1,000 (0.02 x 50,000)

The final deductible expense                 $570

This means the amount that Gwen can deduct from the expenses for the trip after the limitations as calculated above is $570

To record expected customer returns, make adjusting entries using Estimated Customer Returns Expense and Allowance for Estimated Customer Returns. For the returned merchandise and cash refund, debit Accounts Payable - Anderson Co. and credit Sales Returns and Allowances, as well as debit Cash and credit Accounts Payable - Anderson Co.

To record the expected customer returns, Zell Company would make adjusting entries at the end of the year. The journal entry would be:

Debit: Estimated Customer Returns Expense $27,000

Credit: Allowance for Estimated Customer Returns $27,000

To record the returned merchandise and cash refund to Anderson Co., the journal entry would be:

Debit: Accounts Payable - Anderson Co. $5,000

Credit: Sales Returns and Allowances $5,000

Debit: Cash $5,000

Credit: Accounts Payable - Anderson Co. $5,000

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(a) Adjusting entries:

1. Debit Merchandise Returns Expense $27,000, credit Allowance for Sales Returns and Allowances $27,000.

2. Debit Merchandise Returns Expense $16,000, credit Allowance for Sales Returns and Allowances $16,000.

(b) Entries:

1. Debit Sales Returns and Allowances $5,000, credit Accounts Receivable—Anderson Co. $5,000.

2. Debit Cost of Merchandise Sold $3,100, credit Merchandise Inventory $3,100.

(a) Adjusting entries on December 31, 2016:

1. To record estimated returns for merchandise:

[tex]\[ \text{December 31, 2016} \][/tex]

[tex]\[ \text{Merchandise Returns Expense} \qquad 27,000 \][/tex]

[tex]\[ \text{Allowance for Sales Returns and Allowances} \qquad 27,000 \][/tex]

Calculation:

- Estimated returns for sales: $1,800,000 * 1.5% = $27,000

2. To record estimated returns for damaged merchandise:

[tex]\[ \text{December 31, 2016} \][/tex]

[tex]\[ \text{Merchandise Returns Expense} \qquad 16,000 \][/tex]

[tex]\[ \text{Allowance for Sales Returns and Allowances} \qquad 16,000 \][/tex]

(b) Entries to record the returned merchandise and cash refund to Anderson Co. on February 3, 2017:

1. To record merchandise returned by Anderson Co.:

[tex]\[ \text{February 3, 2017} \][/tex]

[tex]\[ \text{Sales Returns and Allowances} \qquad 5,000 \][/tex]

[tex]\[ \text{Accounts Receivable—Anderson Co.} \qquad 5,000 \][/tex]

2. To record cost of returned merchandise:

[tex]\[ \text{February 3, 2017} \][/tex]

[tex]\[ \text{Cost of Merchandise Sold} \qquad 3,100 \][/tex]

[tex]\[ \text{Merchandise Inventory} \qquad 3,100 \][/tex]

Betty's implicit and explicit costs are equal to

D. $204,500.

Explanation:

Answer: Supply decreases

Explanation:

Supply is the amount of products a manufacturer is willing to sell at a particular price at a given period. If the suppliers of fishes or fishermen believe that they can generate more income selling fruit smoothies and change their jobs, this will have a negative effect on the supply of fish. There is a direct relationship between the producers and the number of fishes supplied.

More producers will lead to more fishes and less producers will lead to less fishes supplied. Since some fishermen have changed jobs, this implies that there is a reduction in producers which will also lead to reduction in supply.

Answer:

The correct answer is letter "C": both I and II.

Explanation:

Retirement annuities are perpetual payments received by insurance companies as the result of hiring an insurance paid in a lump sum or small payments. Disability income insurance is one hired to provide employees a percentage of their regular salary when they are not working as a result of an illness or disability while still being employed.

Both types of insurances mentioned above are offered by insurance companies offering life insurances.

Answer:

Value of money in her saving account in one year = $5275.

Explanation:

As we know that :

P= $5000

i= 5.5%

n=number of years

    Simple interest = Principal * interest rate * number of years

                             =      P          *     i                 *    n

                            =  5000 * .055 * 1

      Simple interest = $ 275

Total = Principle + interest

       = $5000+275

     = $5275

After one year, Stella's savings account will become worth a total of $5,275 due to the interest accrued over the year.

The money Stella deposited in her savings account amounts to $5,000, and the bank offers a yearly interest rate of 5.5%. To calculate the total value of the savings account after one year, we first calculate the interest, which is the product of the principal amount ($5,000), the interest rate (5.5%), and the time in years (1). This comes out to be $5,000 * 5.5/100 * 1 = $275.

Then, the total value of money in the savings account after one year would be the initial deposit amount plus the interest, which would be $5,000 + $275 = $5,275. Therefore, after a year, Stella's savings account would be valued at $5,275.

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Answer:

Explanation:

a. If the market rates are lower than 7% stated bond interest rate, bond can be sold at premium. Market interest rates are lesser but present value cash flows from bonds are higher. That is why people will be willing to pay higher price for the bond in order to get a bond with high coupon rates.

b.

Dr Cash 2,060,000

Cr Bonds payable 2,000,000

Cr Premium on bonds payable 60,000

c. Accrued interest = Face value*Coupon rate*Period of interest/12 = 2,000,000*7%*6/12 = 70,000

Premium amortization = 60,000/20*6/12 = 1,500

Dr Interest expense 70,000

Dr Premium on bonds payable 1500

Cr Interest payable 71,500

a. The proceeds from the bond issue would be more than the face amount when market interest rates are lower than the stated interest rate. b. The journal entry to record the issuance of the bonds is: Debit Cash $2,060,000, Credit Bonds Payable $2,000,000, and Credit Premium on Bonds Payable $60,000. c. The interest expense for the fiscal year ended September 30, 2016, is $137,000.

a. When market interest rates are lower than the stated interest rate on the bonds, it means that the bonds are more attractive to investors. In this case, the proceeds from the bond issue would be more than the face amount because investors are willing to pay a premium to earn a higher interest rate than the market rate.

b. The journal entry to record the issuance of the bonds would be:

c. To calculate the interest expense for the fiscal year ended September 30, 2016, we first need to determine the annual interest payment. The annual interest payment is calculated by multiplying the face amount of the bonds by the stated interest rate. In this case, the annual interest payment is $2,000,000 x 7% = $140,000. Since the premium is amortized on a straight-line basis, the amortization expense would be $60,000 / 20 years = $3,000 per year. Therefore, the interest expense for the fiscal year would be $140,000 - $3,000 = $137,000.

Answer:

The correct answer is letter "A": cost-plus pricing.

Explanation:

Cost-plus pricing is a strategy to determine the price of a product based on adding the costs of production (raw materials, direct labor, and overhead) so then a percentage of the total costs will be added representing the profit of the company. The total value will be the price consumers will have to pay for the product. Cost-plus pricing is also called markup pricing.

Answer:

The Answer is A) 2

Explanation:

Drawing details from the question, the formula for calculating Average Waiting Time under the Single -Server Queue Model is given as:

Average  Waiting Time = (Average No of customers waiting in line)  

                                                                        λ

> λ is a mathematical symbol pronounced Lambda and here refers to Rate of Arrival.

> We have Average Waiting Time = 8

> We have λ (Average Rate of Arrival) = 15 People every hour (that is 60 Minutes)

> that is 15/60= 0.25

Therefore λ = 0.25

> Lets assume that Average No. of Customers Waiting in Line is C

Our formula (by substituting the various factors above now becomes

8 = C/0.25

To get, we cross multiply. So we have:

C = 8 x 0.25

C = 2 thefore the Average No. of Customers waiting according to the single-server queue model given the above conditions is 2.

Cheers!

A consumer is the beneficiary of a commodity, service, product, or idea gained from a seller, vendor, or supplier via a financial transaction or exchange for money or some other emoluments in sales, commerce, and economics.

The average number of customers waiting according to the single-server queue model is 2.

The formula for determining Average Waiting Time under the Single-Server Queue Model, as derived from the question, is as follows:

(Average Number of Customers in Queue)

Average Waiting Time is a mathematical symbol that is spelled Lambda and relates to the Rate of Arrive.

We have a Delay of 8 minutes

We have (Average Rate of Arrival) = 15 people every hour (60 minutes )which is 15/60= 0.25.

Assume that the average number of customers waiting in line is C.

By adding the multiple aspects above, our formula now becomes 8 = C/0.25

We cross multiply to obtain. As a result, we have:

C = 0.25 x 8 C = 2

Therefore the Average No. of Customers waiting according to the single-server queue model given the above conditions is 2.

To know more about the number of customers, refer to the link below:

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Answer:

a. 11.88%

b. -3.68%

Explanation:

Given that

Risk free rate = 6%

Beta = 1.4%

Market rate = 10.2%

Risk free rate = 6%

Alpha return = 8.2%

a. The computation of expected return of portfolio is given below:-

= Risk free rate + Beta (Market rate - Risk free rate)

= 6% + 1.4% (10.2% - 6%)

= 11.88%

b. The calculation of Alpha of portfolio is shown below:-

= Alpha return - Expected return

= 8.2% - 11.88%

= -3.68%

Answer:

The manufacturer have to produce 20,000 circuit boards per run with 50 production runs

Explanation:

Let x = number of circuit boards to be produced

An average of x/2 circuit boards are stored throughout the year at a cost of $2 each;

so annual storage cost = x/2*2 = x

Note: it costs $10 each to produce x circuit boards and $400 to set up

Therefore, The cost per run = 10x + 400

The 1,000,000 circuit boards at x circuit board per run would require 1000000/x runs.

Therefore, production costs = cost per run * production run

production costs = (10x + 400)*(1000000/x) = 10,000,000 + 400,000,000/x

Total cost C = storage cost + production cost

C = x + 10,000,000 + 400,000,000/x

Set c to zero and differentiate c with respect to x

0=1+0-400,000,000/x²

Therefore x = 20,000

Number of circuit boards that should be produced to minimize cost is 20,000

While the production runs needed = 1,000,000/x = 1,000,000/20,000= 50

The manufacturer have to produce 20,000 circuit boards per run with 50 production runs

Answer:

The Question here is about Minimizing Inventory Costs. It is a topic treated under the Supply Chain Management. It is a concept very crucial to the work of Supply Chain Managers, Operations Managers as well as Accounting and Finance professionals who are tasked with minimizing cost whilst maximizing profit.

Inventory costs may be reduced by:

• Avoid Minimum Order Quantities

• Know Your Reorder Point.

• Organize Your Warehouse.

• Get Rid of Obsolete Stock.

• Implement a Just-in-Time Inventory System.

• Use Consignment Inventory.

• Reduce Your Lead Time.

• Monitor KPIs

The minimum inventory cost according to the factors given in the question above is:

See how we got there below:

Explanation:

Step 1    

Number of  Circuit Boards expected to be sold in a year = 1,000,000

Cost of each Circuit Board = $10

Cost of Setting up the 3D printer = $400

Cost of Storage for each Circuit board = $2

Step 2

Let

x = the number of circuit boards in each run

Storage Costs as in the question, an average of ([tex]\frac{X}{2}[/tex]) circuit boards are stored throughout the year, at a cost of $2 each, so annual storage costs are

Storage Costs = [tex]\frac{X}{2}[/tex]* 2 = x

Therefore Storage Costs = x

Production Costs The cost per run is given below:

Cost Per Run = (10x + 400) this is x Circuit Boards at $10 each, plus $400 set up costs

The 1,000,000 circuit boards at x circuit boards per run = [tex]\frac{1,000,000}{X}[/tex]

Therefore production costs are:

(Production Cost ) = (10x + 400) * ([tex]\frac{1,000,000}{X}[/tex])

The above expression is cost per run multiplied by number of runs

Total cost The total cost is storage cost plus production cost:

C(x) = x + (10x +400) (1,000,000/x)    

Opening up the brackets we have

> C(x) = x + 10,000,000 + (40,000,000/x)

Step 3

For minimum cost the first derivative of the cost function will be equal to 0. Hence differentiating C(x) respect to x and  equating to 0 gives:

C'(x) =  x + [tex]\frac{40000000}{X}[/tex] + 10,000,000 = 0  

First Derivative =

1 - (40,000,000/[tex]X^{2}[/tex]) = 0

1 = [tex]X^{2}[/tex]/40,000,000

[tex]X^{2}[/tex] = 40,000,000

X = [tex]\sqrt{40,000,000}[/tex]

X = 6324.55532034

X is approximately equal to 6,325

So by the second derivative test,

C'' (X) = [tex]\frac{80,000,000}{X^{3} }[/tex] > 0

= 430.886938006 or approximately 431

Therefore

Now for the cost the total number of orders placed at a time will be

= [tex]\frac{6,325}{431}[/tex]

= 14.6751740139 or approximately 15

Step 4

Therefore for minimizing inventory cost, the order size should be 431 Circuit Boards per order, ordered 15 times in a year.

Cheers!