I calculated an “inventory turnover ratio” which measures the number of times a company sells its inventory during a year. A high rate of turnover indicates easiness in selling inventory; a low rate indicates difficulty. In 2011, the inventory turnover was 6.1. By 2012 the ratio decreased to 5.2. The decrease may be due to a slow ability to turn around merchandise in sales and potentially due to paying a higher cost for goods.
Janis Maraya March 16, 2015 ACC/543 Thomas Frank 4.16 1. Should Yoklic make or buy the subassemblies? Create a schedule that shows the total quantitative differences between the two alternatives. Manufacture Purchase Direct Materials 4 0 Direct Labour 30 0 Variable Overhead 15 0 Fixed Overhead 25 25 Purchase Cost 0 55 Total Unit Cost 74 80 Although the company would save $49 if it chose not to manufacture, the purchase of subassemblies would have a slight increase of $6. To save any money it would be better to manufacture than buy.
Traditional allocations with one resources to spread overhead often charges products an "average rate" and so fussy and difficult products get a break (charged less than they consume or "under costed") and easy low-hassle products look worse than they are (charged more then they consumer or "over costed"). Companies that benefit from ABC are those that have significant levels of variable overhead and those with products that use disproportionate share of overhead resources. Companies with small overhead or products that all use overhead in about the same proportion would get about the same overhead allocation under traditional and ABC methods. Since ABC methods are more work (so more expensive), if there isn't a benefit, it is better to stick to a simpler and cheaper method. Krishnan (2006) implemented ABC at a university (actual university was kept anonymous in the study) to help them understand their costs and cost drivers in order to better understand why their operation costs were so high.
Executive bonuses for that year would trigger at or below 10% decline, as long as corporate profitability starts stabilizing. Some issues that may arise are; being unable to meet goals due to poor economy, having smaller bonuses due to the decline of corporate profit. Executive salary lacks incentive for performance therefore bonuses or long term incentives have to be part of compensation. 6. Explain a) A.
This estimated price is pretty close to Dan´s estimated prices for the IPO. However Lisa´s estimated price of $18.36 is twice as small as Joe´s price. (5) Based on all three estimates and on the valuation figures for the three competitors how much per share do you think that Citrus Glow is really worth? Explain your rationale. Consequently we should take the average of all three models, because every model has it´s pros and cons against the other and we can´t decide which model calculates the right price.
Ordering less than what the actual demand requires will result in an (understocking) situation which according the case data represent a loss of opportunity equal to 24% of the item’s wholesale price. However, ordering more than what actual demand will require will represent a financial loss equal to 8% of the item’s wholesale price. Wally Obermeyer needs to focus on structuring the initial order quantity that maximizes production capacity while minimizing the risk and financial impact of over or under ordering an item. The best way to achieve this is to equalize the cost of overstocking versus understocking an item. Using the variable “P” to represent the probability of being understocked and (1 – P) the probability of being overstocked.
The substitution effect is the effect on the quantity of a good demanded by the consumer as a result of the relative price being different and this factor alone. In this case, the price of both black and white colour televisions fall, whilst the price of all other goods remain constant. This may lead to individuals being more inclined to spend money on consuming both black and white, and colour televisions as they are relatively cheaper than other goods. The income effect of a decrease in the price of the good is the effect on the quantity demanded due to the fact that the consumer’s real income has changed and that factor alone. In this particular case, the consumer’s real income has increased as a result of the fact that the price of both black and white televisions and coloured televisions have fallen.
Theoretically, the weights should be based on market values, but if a firm’s book value weights are reasonably close to its market value weights, book value weights can be used as a proxy for market value weights. Consequently, target market value weights should be used in the WACC equation. 12- In general, failing to adjust for differences in risk would lead the firm to accept too many risky projects and reject too many safe ones. Over time, the firm would become more risky, its WACC would increase, and its shareholder value would suffer. The cost of capital for average-risk projects would be the firm’s cost of capital, 10%.
The correlation between price and how much good/service is supplied to the market is known as supply relationship. In the case of Bodyline in Table 6, as the price goes up, the quantity of Californians would go down. This seems to be logically correct because as the price of a good goes up, people would naturally avoid buying a product that will force them to abstain expenditure of something else they value more. The data in Table 6 is plotted in the graph shown below. According to Price (£) vs. Demand of Californians graph, it shows the negative relationship between price and quantity demanded.
What are the strengths and weaknesses of Barilla’s approach to continuous replenishment? How might it be improved? Strengths of Implementing JITD * Barilla forecasted demand of the products better than the distributors by using more sophisticated techniques. Based on the history of shipments made by distributors, Barilla could forecast production requirements and shipping requirements thereby reducing its production costs and inventories held in Central distribution centers. * Stock outs are greatly reduced greatly by implementing JITD.