The adjusted trial balance for China Tea Company at December 31, 2021, is presented below:
1 answer:
Answer:
Kindly check attached picture
Explanation:
Given the details below
Accounts Debit Credit
Cash $16,000
Accounts receivable 162,000
Prepaid rent 10,000
Supplies 31,000
Equipment 370,000
Accumulated depreciation $129,000
Accounts payable 11,000
Salaries payable 3,500
Interest payable 1,900
Notes payable (due in two years) 37,000
Common stock 210,000
Retained earnings 176,100
Dividends 27,000
Service revenue 360,000
Salaries expense 150,000
Advertising expense 75,000
Rent expense 18,000
Depreciation expense 32,000
Interest expense 2,500
Utilities expense 35,000
Totals $928,500 $928,500
Prepare an income statement for China Tea Company for the year ended December 31, 2021
Kindly check attached picture
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Answer:
(1) 2,28 units
(ii) 1,414 units
(iii) Minimum stock is less than EOQ.
Explanation:
(1) Units Ordered each time
where,
A = Annual Requirement =40,000 Units
O = Ordering Cost = $200 Per unit
Minimum Stock for lead time:
= (40,000 Units × 10) ÷ 365
= 1096 (Approximately)
C=Annual Carrying cost per unit = $40 × 10% × 1/2
= 2
= 2828 Units
(2) Average Inventory = EOQ ÷ 2
= 2828 Units ÷ 2
= 1,414 Units
(3) If the Lead time Increase 10 to 15 days:
Minimum Stock Need to be Maintained:
= Avg Daily Demand × Lead time
= (40,000 Units ÷ 365) × 15
= 1,644 Units
Minimum Stock is Less the EOQ , then Increasing Lead time to 15 Days Does not Have effect on EOQ.