Q2.7 (Algo) Industrial Baking Process [2.3]
Strohrmann, a large-scale bakery in Pennsylvania, is laying out a new production process for their
packaged bread, which they sell to several grocery chains. It takes 6 minutes to bake the bread.
1. How many loaves of bread must be baked per minute to produce 3,800 loaves of bread per
hour? (1 pt)
(Round the answer to 2 decimal places.)
38000/60 = 6.33 loaves per minute
2. How large an oven is required so that the company is able to produce 3,800 loaves of bread per
hour, as measured in terms of the number of units that can be baked simultaneously? (1pt)
(Round your answer to the nearest whole number.)
66.33x 6= 379.97 or 380 loaves
Q2.3 (Algo) Inventory Cost [2.4]
A manufacturing company producing medical devices reported $64,000,000 in sales over the last
year. At the end of the same year, the company had $24,000,000 worth of inventory of ready-to-ship
devices.
1. Assuming that units in inventory are valued (based on COGS) at $1,000 per unit and are sold for
$2,000 per unit, what are the annual inventory turns? The company uses a 27 percent per year cost
of inventory. That is, for the hypothetical case that one unit of $1,000 would sit exactly one year in
inventory, the company charges its operations division a $270 inventory cost. (1pt)
(Round the answer to 2 decimal places.)
COGS: 64,000,000 x 1000/2000 = 32,000,000
Turns: 32,000,000 / 24,000,000 = 1.3333 or 1.33 turns per year
2. What is the per unit inventory cost in $ for a product that costs $1,000? (2pt)
(Round the answer to 2 decimal places.)
0.75 years
Q2.12 (Algo) Kroger [2.4]
The following provides 2012 financial information for Kroger (in million $s):
Inventory
Revenue
Cost of goods sold
$
$
$
Kroger
6,182
87,133
67,635
a. In 2012, what were Kroger’s annual inventory turns? (1pt)
(Round the answer to 2 decimal places.)
10.94 turns per year
Q3.6 (Algo) Valley Forge Income Tax [3.6]
VF is a small accounting firm supporting wealthy individuals in their preparation of annual income tax
statements. Every December, VF sends out a short survey to their customers, asking for the
information required for preparing the tax statements. Based on 24 years of experience, VF
categorizes their cases into the following groups:
Group 1 (new customers, easy): 15 percent of cases
Group 2 (new customers, complex): 5 percent of cases
Group 3 (repeat customers, easy): 40 percent of cases
Group 4 (repeat customers, complex): 40 percent of cases
Here, “easy” versus “complex” refers to the complexity of the customer’s earning situation.
In order to prepare the income tax statement, VF needs to complete the following set of activities.
Processing times (and even which activities need to be carried out) depend on which group a tax
statement falls into. All of the following processing times are expressed in minutes per income tax
statement.
Group
Filling
Initial Meeting
Preparation
1
2
3
4
20
40
20
40
25
75
No meeting
No meeting
120
255
70
200
Review by Senior
Accountant
25
55
5
35
Writing
The activities are carried out by the following three persons:
Administrative support person: filing and writing.
Senior accountant (who is also the owner): initial meeting, review by senior accountant.
Junior accountant: preparation.
Assume that all three persons work eight hours per day and 20 days a month. For the following
questions, assume the product mix as described above. Assume that there are 60 income tax
statements arriving each month.
1. Which of the three persons is the bottleneck? (2pt)
The Junior accountant (highest utilization)
55
75
25
65
2. What is the (implied) utilization of the senior accountant? The junior accountant? The
administrative support person? (3pts)
(Round the answers to 3 decimal places.)
Senior accountant: 0.188
Junior accountant: 0.867
Admin Support: 0.481
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