Safety Stock; Reorder Point Party-Hearty Company makes a variety of holiday party packs. One… 1 answer below »

Safety Stock; Reorder Point Party-Hearty Company makes a variety of holiday party packs. One party pack is for a bachelorette party. It includes a tiara, a pink feathered boa, and a t-shirt emblazoned with ‘‘I’m the Bride.’’ Pink feathered boas are purchased from an outside supplier. Each year, 8,000 boas are used, at the rate of 20 boas per day. However, some days as many as 65 boas are used. It takes 6 days from the time that Party-Hearty places an order of boas to the arrival of the order.


1. Calculate the reorder point without safety stock.

2. Calculate the amount of safety stock.

3. Calculate the reorder point with safety stock.

4. Conceptual Connection: As a manager for Party-Hearty, how could seasonality affect the usage of boas? How could knowledge of the effect of seasonality affect the amount of safety stock carried? PROBLEMS Problem 8-35 Variable-Costing and Absorption-Costing Income Tenley Company produces and sells wooden pallets that are used for moving and stacking materials. The operating costs for the past year were as follows:

During the year, Tenley produced 300,000 wooden pallets and sold 306,500 at $9 each. Tenley had 11,300 pallets in beginning finished goods inventory; costs have not changed from last year to this year. An actual costing system is used for product costing.


1. What is the per-unit inventory cost that will be reported on Tenley’s balance sheet at the end of the year? How many units are in ending inventory? What is the total cost of ending inventory?

2. Calculate absorption-costing operating income.

3. Conceptual Connection: What would the per-unit inventory cost be under variable costing? Does this differ from the unit cost computed in Requirement 1?


4. Calculate variable-costing operating income.

5. Suppose that Tenley Company had sold 296,700 pallets during the year. What would absorption-costing operating income have been? Variable-costing operating income?


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