Case Study #3 – Inventory Management – Wagner Fabricating Compan.docx

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Case Study #3 – Inventory Management – Wagner Fabricating Company Your answers to this case study will be due on Friday, 5 March 2021. Managers at Wagner Fabricating Company are reviewing the economic feasibility of manufacturing a part that the company currently purchases from a supplier. Forecasted annual demand for the part is 3,200 units. Wagner operates 250 days a year. Wagner’s financial analysis established a cost of Capital of 13% for the use of funds for investments within the company. In addition, over the past year $600,000 was the average investment in the company’s inventory. Accounting information shows that a total of $24,000 was spent on taxes and insurance related to the company’s inventory. In addition, an estimated $12,000 was lost due to inventory shrinkage, which included damaged goods as well as pilferage. A remaining $15,000 was spent on
warehouse overhead, including utility expenses for heating and lighting. An analysis of the purchasing operation shows that approximately two (2) hours are required to

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