Jerry Allison Is in Charge of Production for a Small

question 1

Multiple Choice

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year.
-Use the information in Scenario D.1.What is the maximum inventory if Jerry chooses to produce at the economic production lot size (ELS) ?

• A) Fewer than or equal to 300 units
• B) Greater than 300 units but fewer than or equal to 320 units
• C) Greater than 320 units but fewer than or equal to 340 units
• D) Greater than 340 units

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Definitions:

Standard Cost Variances

Differences between the actual costs incurred and the standard costs that were expected or budgeted, used for budget control and financial analysis.

Raw Materials

Basic substances in their natural, modified, or semi-processed state used as inputs to a production process for manufacturing goods.

Raw Materials Inventory

Goods and materials that are used in the manufacturing process to be converted into finished products, tracked in accounts as a current asset.

FOH Volume Variance

The difference between the budgeted and actual volume of production, affecting fixed overhead costs.