Question

Kenta Manufacturing Company obtains its raw materials from a variety of suppliers. Kentas strategy is to obtain the best price by letting the suppliers know that it buys from the lowest bidder. Approximately four years ago, unexpected increases in demand resulted in materials shortages. Kenta was unable to find the materials it needed even though it was willing to pay premium prices. Because of the lack of raw materials, Kenta was forced to close its manufacturing facility for two weeks. Its president vowed that her company would never again be at the mercy of its suppliers. She immediately ordered her purchasing agent to perpetually maintain a one-month supply of raw materials. Compliance with the presidents orders resulted in a raw materials inventory amounting to approximately $1,200,000. Warehouse rental and personnel costs to maintain the inventory amounted to $8,000 per month. Kenta has a line of credit with a local bank that calls for a 10 percent annual rate of interest. Assume that Kenta finances the raw materials inventory with the line of credit. Required Based on the information provided, determine the annual holding cost of the raw materials inventory. Annual inventory holding cost

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Annual inventory holding cost

= (Raw material value * Annual interest rate ) + ( Monthly rental & personnel cost * 12 months)  

= ($1,200,000 * 10 %) + ($8,000 * 12 )

= $216,000

Add a comment
Know the answer?
Add Answer to:
Kenta Manufacturing Company obtains its raw materials from a variety of suppliers. Kenta's strategy is to...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Benson Manufacturing Company obtains its raw materials from a variety of suppliers. Benson's strategy is to...

    Benson Manufacturing Company obtains its raw materials from a variety of suppliers. Benson's strategy is to obtain the best price by letting the suppliers know thatcit buys from the lowest bidder. Approximately four years ago, unexpected increases in demand resulted in material shortages. Benson was unable to find the material needed even though it was willing to pay premium prices. Because of the lack of raw materials. Benson was forced to close its manufacturing facility for two weeks. Its president...

  • During January, its first month of operations, Dieker Company accumulated the following manufacturing costs: raw materials...

    During January, its first month of operations, Dieker Company accumulated the following manufacturing costs: raw materials purchased $4,000 on account, factory labor $6,000, and utilities payable $2,000. Brief Exercise 2A-2 During January, its first month of operations, Dieker Company accumulated the following manufacturing costs: raw mate $2,000. Record the company's manufacturing costs in its job order costing system. Manufacturing Costs Raw Materials Inventory Factory Labor Manufacturing Overhead Purchased raw materials Incurred factory labor Factory utilities पी पी Balance LINK TO...

  • During January, its first month of operations, Flounder Company accumulated the following manufacturing costs: raw materials...

    During January, its first month of operations, Flounder Company accumulated the following manufacturing costs: raw materials purchased $5,300 on account, factory labor $7,400, and utilities payable $3,100. In January, requisitions of raw materials for production are as follows: Job 1 $960, Job 2 $1,400, Job 3 $760, and general factory use $620. Record raw materials used. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Manufacturing Costs Factory Labor Raw Materials Inventory...

  • During January, its first month of operations, Ayayai Company accumulated the following manufacturing costs: raw materials...

    During January, its first month of operations, Ayayai Company accumulated the following manufacturing costs: raw materials purchased $4,100 on account, factory labor $6,100, and utilities payable $2,100. In January, requisitions of raw materials for production are as follows: Job 1 $910, Job 2 $1,200, Job 3 $710, and general factory use $610. Record raw materials used. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) MANUFACTURING COSTS RAW MATERIALS FACTORY MANUFACTURING INVENTORY...

  • During January, its first month of operations, Whispering Winds Company accumulated the following manufacturing costs: raw...

    During January, its first month of operations, Whispering Winds Company accumulated the following manufacturing costs: raw materials purchased $5,400 on account, factory labor $6,100, and utilities payable $2,500. Record the company's manufacturing costs in its job order costing system. Manufacturing Costs Factory Labor Raw Materials Inventory Manufacturing Overhead Purchased raw materials $ $ $ Incurred factory labor Factory utilities Balance During January, its first month of operations, Flounder Company accumulated the following manufacturing costs: raw materials purchased $5,300 on account,...

  • During January, its first month of operations, Dieker Company accumulated the following manufacturing costs: raw materials...

    During January, its first month of operations, Dieker Company accumulated the following manufacturing costs: raw materials $5,400 on account, factory labor $7,300 of which $5,600 relates to factory wages payable and $1,700 relates to payroll taxes payable, and factory utilities payable $2,600. Prepare separate journal entries for each type of manufacturing cost. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 31 (To record purchase of raw...

  • Just-in-Time Inventory The Field Manufacturing Company uses the perpetual inventory system for its raw material inventory....

    Just-in-Time Inventory The Field Manufacturing Company uses the perpetual inventory system for its raw material inventory. During 2012, Field plans to include raw material costing $2,400,000 in the products that it manufactures. Henry Field, president of the company, wants to adopt the just-in-time manufacturing philosophy for the raw materials inventory during 2012. He wants to have only the raw material needed for the next day's production at the end of each day. The factory operates 300 days each year. Historically,...

  • During January, its first month of operations, Sunland Company accumulated the following manufacturing costs: raw materials...

    During January, its first month of operations, Sunland Company accumulated the following manufacturing costs: raw materials $5,700 on account, factory labor $6,300 of which $5,500 relates to factory wages payable and $800 relates to payroll taxes payable, and factory utilities payable $2,700. Prepare separate journal entries for each type of manufacturing cost. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 31 (To record purchase of raw...

  • During January, its first month of operations, Dieker Company accumulated the following manufacturing costs: raw materials...

    During January, its first month of operations, Dieker Company accumulated the following manufacturing costs: raw materials $5,400 on account, factory labor $6,700 of which $5,900 relates to factory wages payable and $800 relates to payroll taxes payable, and factory utilities payable $2,100. Prepare separate journal entries for each type of manufacturing cost. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 31 enter an account title to...

  • Walston Manufacturing Company has provided the following data concerning its raw materials inventories last month: Beginning...

    Walston Manufacturing Company has provided the following data concerning its raw materials inventories last month: Beginning raw materials inventory Purchases of raw materials Ending raw materials inventory 5 80,000 $420,000 $ 50,000 The cost of the raw materials used in production for the month was: Multiple Choice $500,000 $450,000 Multiple Choice $500,000 $450,000 $390,000 $470.000 Multiple Choice O work in process inventory has decreased during the period. finished goods inventory has increased during the period. total manufacturing costs must be...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT