Answer:
A. Average cycle inventory 500 units
Value of cycle inventory $55,000
B. Average pipeline inventory 456 units
Value of the pipeline inventory $36,480
Explanation:
a. Calculation to determine How many units of the part are held, on average, in cycle inventory
Calculation for Average cycle inventory
Average cycle inventory=1000/2
Average cycle inventory=500 units
Therefore the Average cycle inventory is 500 units
Calculation for Value of cycle inventory
Value of cycle inventory=(500 units) *($50+$60)
Value of cycle inventory=(500 units*$110)
Value of cycle inventory=$55,000
Therefore the Value of cycle inventory is $55,000
b. Calculation to determine Avarage Pipeline inventory and Value of the pipeline inventory
First step is to calculate the unit cost using this formula
Unit cost = Material + 50%of labor and variable overhead
Let plug in the formula
Unit cost=$50+(50%*$60)
Unit cost= $50 + $30
Unit cost= $80
Now let calculate the Average pipeline inventory
Average pipeline inventory = = [(3800 units/year)/(50wks/yr)] x (6 weeks)
Average pipeline inventory= 456 units
Therefore Average pipeline inventory is 456 units
Calculation to determine Value of the pipeline inventory
Value of the pipeline inventory = (456 units) x ($50+$30)
Value of the pipeline inventory=456 units×$80
Value of the pipeline inventory= $36,480
Therefore the Value of the pipeline inventory is $36,480
