Reorder Point And Inventory Costs Accounting Essay


On an examination of its records the Boeing Company has determined that part number A1234 costs $3 per unit and that it costs $68 to place an order. Inventory carrying charges are 15% of the value of average inventory. ABC currently purchases $6,000 worth of this part per year. There are 250 working days per year and the lead time for securing orders is 6 days. Assuming a constant rate of usage, calculate: 

a. the economic order quantity; 

Q= the economic order quantity

(3Q)/2 * 15% =6000/(3*Q)*68



b. the recorder point; 

6000 * 6 / (3*250)=48 DAYS

c. annual inventory costs including purchase outlay. 



Prepare your solution as a spreadsheet following the assignment requirements. Paste your spreadsheet AND the formula view in your document. Ensure that the data entry area and the solution/report area are completely separate and that no data is entered into the report area. 

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Include an EOQ graph. 

Check the study guide for references on this topic.

Question 11 

P7-35B Dickson Insurance 

Source:  from another text by Horngren et al, Horngren C. T., & Harrison, W. T. & Oliver (2012). Accounting (9th ed., p. 395 -396 of the reading). Prentice Hall. Not your text. See the chapter reading provided in the Study Guide. 

Answer all parts. Prepare your solution as a spreadsheet for part 1 following the assignment requirements. Paste your spreadsheet AND the formula view in your document. Ensure that the data entry area and the solution/report area are completely separate and that no data is entered into the report area. Use an IF function to check balances.


Bank Statement for May

Beginning balance


Deposits and other Credits

May 1 EFT

$ 200









22 BC





Checks and other Debts

May 11(check no. 1416)

$ 850

19 EFT


22(check no. 1416)


29(check no. 1416)


31(check no. 1416)


31 SC


( 4580)

Ending balance

$ 19,460

Question 12 

Conduct a web search for two of the following: 


social and environmental accounting;

triple bottom line reporting;

history of accounting;

lean accounting;

panopticism and accounting control systems;

ethics and corporate failure;

business report writing.

US reaction to proposed IFRS.

Accounting and Impression Management. 

Summarise the results of your research in about 300-400 words each. 


History of Accounting

Accounting has a long history and it is often called the "oldest profession"; in fact, since prehistoric times families had to account for food and clothing to face the cold seasons. Later, as man began to trade, we established the concept of value and developed a monetary system. Evidence of accounting records can be found in the Babylonian Empire (4500 B.C.), in pharaohs' Egypt and in the Code of Hammurabi (2250 B.C.). Eventually, with the advent of taxation, record keeping became a necessity for governments to sustain social orders.

The Italian Renaissance brought the artistic accomplishments of man to new heights. At this time, Venice was the business cradle of Europe, and it was here among merchants that double entry accounting was invented and practised. During this period Fra Luca Pacioli wrote his "Summa" dealing with record keeping and double-entry accounting, one of the very first published books of the time that would become the accounting "textbook" for the next 500 years.

The father of accounting: Fra Luca Pacioli

Fra Luca Pacioli was born during 1445 in Sansepolcro, Tuscany. He was a mathematician and friend of Leonardo da Vinci. He wrote and taught in many fields including mathematics, theology, architecture, games, military strategy and commerce. In 1494, Pacioli published his famous book "Summa de Arithmetica, Geometria, Proportioni et Proportionalita" (The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality). One section of this book was dedicated to the description of double-entry accounting. The Summa was one of the first books published on the Gutenberg press, became an instant success and was translated into German, Russian, Dutch, and English. The Summa made Pacioli a celebrity and insured him a place in history, as "The Father of Accounting."

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Entering into the Information Age, the cost of today's products is mostly made up of R&D, intellectual assets and services. Pacioli's accounting system has not changed practically for the last 500 years, and as long as our wealth was physical and our costs included mostly material and labour, this system was adequate. The double-entry accounting system relied on historical information and has traditionally provided financial reports and statements two weeks after the month-end closing period. Businesses today, require information not two weeks after month-end but immediately; accounting information, activities and indices of performance must be available at the push of a button/key. The trends in the information age is to conceptualize and implement accounting as a data base information system gathering all the quantitative and qualitative events of all the areas of a company.

Social and Environmental Accounting

Social accounting (also known as social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting, or sustainability accounting) is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large.

Social accounting is commonly used in the context of business, or corporate social responsibility (CSR), although any organisation, including NGOs, charities, and government agencies may engage in social accounting. It emphasises the notion of corporate accountability. D. Crowther defines social accounting in this sense as "an approach to reporting a firm's activities which stresses the need for the identification of socially relevant behaviour, the determination of those to whom the company is accountable for its social performance and the development of appropriate measures and reporting techniques." Social accounting is often used as an umbrella term to describe a broad field of research and practice. The use of more narrow terms to express a specific interest is thus not uncommon. Environmental accounting may e.g. specifically refer to the research or practice of accounting for an organisation's impact on the natural environment. Sustainability accounting is often used to express the measuring and the quantitative analysis of social and economic sustainability.

Environmental accounting, which is a subset of social accounting, focuses on the cost structure and environmental performance of a company. It principally describes the preparation, presentation, and communication of information related to an organisation's interaction with the natural environment. Although environmental accounting is most commonly undertaken as voluntary self-reporting by companies, third-party reports by government agencies, NGOs and other bodies posit to pressure for environmental accountability.

Accounting for impacts on the environment may occur within a company's financial statements, relating to liabilities, commitments and contingencies for the remediation of contaminated lands or other financial concerns arising from pollution. Such reporting essentially expresses financial issues arising from environmental legislation. More typically, environmental accounting describes the reporting of quantitative and detailed environmental data within the non-financial sections of the annual report or in separate (including online) environmental reports. Such reports may account for pollution emissions, resources used, or wildlife habitat damaged or re-established. In their reports, large companies commonly place primary emphasis on eco-efficiency, referring to the reduction of resource and energy use and waste production per unit of product or service. A complete picture which accounts for all inputs, outputs and wastes of the organisation, must not necessarily emerge. Whilst companies can often demonstrate great success in eco-efficiency, their ecological footprint, that is an estimate of total environmental impact, may move independently following changes in output.

Question 13

B. A man goes to see his medical doctor to find out whether or not he has a deadly disease. The test is positive. The test is 95% accurate and one in one thousand men of his age has this dreaded disease. He now plans to tell his boss what he really thinks of her, quit his job on the spot, sell up all his assets and live in Tuscany or take singing lessons so he can go on the Voice in the time he has left. Is this a rational decision? What is the probability he has this disease? When this question was put to a group of medical doctors, 80% of them answered "95%". Comment.

This is a rational decision since the test is 95% accurate, so he only has 5% chances of survival. Therefore, it is quite reasonable for this man to make decisions and do all the things he truly wants to.

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The probability he has his disease is 1/1000 = 0.1%

C. Suppose an urn contains 100 marbles, 75 red and 25 black. A marble is drawn at random from the urn and you are asked to guess what colour you believe the marble to be. The marble is then shown, replaced, and the urn's contents again randomised. The aim is to maximise the number of correct guesses. Before reading any further, what strategy would you employ? What would you guess? 

Assume 4 red come out in a row. What would your next guess be? Why? 

I would employ the strategy of testing the probability of showing red marbles and the probability of showing black marbles. And I would guess red marbles.

If 4 red come out in a row, my next guess would be either red or black, because there is no logic for sure what the next one would be.

D. Discuss the rationality of human decision making using these and other examples. Are there implications for business decision making? In the context of planning what is a "black swan". (About 300 words for this section).

Decision making can be regarded as the mental processes (cognitive process) resulting in the selection of a course of action among several alternative scenarios. Every decision making process produces a final choice. The output can be an action or an opinion of choice.

Human performance in decision terms has been the subject of active research from several perspectives. From a psychological perspective, it is necessary to examine individual decisions in the context of a set of needs, preferences an individual has and values they seek. From a cognitive perspective, the decision making process must be regarded as a continuous process integrated in the interaction with the environment. From a normative perspective, the analysis of individual decisions is concerned with the logic of decision making and rationality and the invariant choice it leads to. Yet, at another level, it might be regarded as a problem solving activity which is terminated when a satisfactory solution is reached. Therefore, decision making is a reasoning or emotional process which can be rational or irrational, can be based on explicit assumptions or tacit assumptions.

One must keep in mind that most decisions are made unconsciously. Jim Nightingale, Author of Think Smart-Act Smart, states that "we simply decide without thinking much about the decision process." In a controlled environment, such as a classroom, instructors encourage students to weigh pros and cons before making a decision. However in the real world, most of our decisions are made unconsciously in our mind because frankly, it would take too much time to sit down and list the pros and cons of each decision we must make on a daily basis.

Logical decision making is an important part of all science-based professions, where specialists apply their knowledge in a given area to making informed decisions. For example, medical decision making often involves making a diagnosis and selecting an appropriate treatment. Some research using naturalistic methods shows, however, that in situations with higher time pressure, higher stakes, or increased ambiguities, experts use intuitive decision making rather than structured approaches, following a recognition primed decision approach to fit a set of indicators into the expert's experience and immediately arrive at a satisfactory course of action without weighing alternatives. Recent robust decision efforts have formally integrated uncertainty into the decision making process.

Question 17

Prepare a business report (as if for senior management) on one of the following using the Internet as a resource. Use correct referencing and include a bibliography. Length - about 300-400 words excluding any appendices. Relate your discussion, at least in part, to accounting. 

A. Digital dashboards in a business environment 

B. Six Sigma. 

C. The Checklist Manifesto: How to Get Things Right - Gawande


D. The Milgram experiment 


E. "Predictably irrational" (Dan Ariely)

John Smith

To: Head of Brands - Innocent Smoothies UK

From: John Smith

Date:  12th November 2009

Title: Beyond 2009 - A Marketing Strategy For Innocent Smoothies

1. Introduction

Following a 30% downturn in the UK smoothies market and a significant decline in market share, Innocent have commissioned a report evaluating the UK smoothie market that recommends a marketing plan for the Smoothies product range in the UK for the next two years.

The objective of this report is to inform Innocent of the status of the current climate, and propose options to grow sales and market share.

2. Methodology

This report is compiled primarily from secondary research. Quantitative data will be sourced from business databases such as Mintel and qualitative data will come from sources such as BBC Online.

A wide range of comparative data will be used to ensure a balanced report. A PESTEL analysis will be used, however not in the acronymic order. A SWOT analysis of the current Innocent business will be used.

The Analysis of data will inform the recommendations given.

3. Analysis & Findings (Part 1)

3.1 Economic Factors

Gross Domestic Product (GDP) 2004 - 2009

The graph below shows the development of GDP for the period Q3 2004 to Q3 2009.

(Direct Gov, 2009)

GDP fell from a steady 2 - 3% into a rapid decline in 2008 and to a low point of -5.5% in 2009. This decline in GDP reflects the reduced demand for goods and services both in the UK and worldwide.  The resulting increase in unemployment and decline in consumer confidence had an adverse impact on business performance.

Consumer confidence is a key indicator for any business as this will impact buying decisions. The luxury goods sector will be impacted harder as consumers focus on essentials such as fuel, food and clothing. Personal debt levels have reduced as a consequence of the consumers lack of confidence in the employment market. To stimulate growth in the economy the Bank of England has reduced interest rates (see appendix 2) to the lowest levels for decades however, consumer confidence still remains low as unemployment continues to grow (see appendix 1) and consumers are unwilling to spend on the high street.

Key Points

      Consumer confidence is low in spite of actions to stimulate recovery

      Unemployment levels remain high

      Interest rates are low are will remain low for the foreseeable future

How does this relate to Innocent?

The recession is one of the main reasons why Innocent is losing sales and market share. High unemployment levels and low consumer confidence has caused consumers to switch to cheaper brands, e.g. own brand supermarket smoothies, or even juices so that they are still able to obtain their fruit, but cheaper.

Premium high street brands such as Waitrose are introducing own label lower costs competing products.

As Innocent is a premium brand, a review of the sales and marketing strategy is key to growing sales and market share, in a changing market environment, where Innocent are the key market leaders.

Innocent will also have to consider to what extent their target consumers (ABC1's) are being affected by the recession.

Consumer confidence is forecast to steadily increase as we gradually head towards positive GDP.


Bank Of England. (2009). Retrieved 10 23, 2009, from Bank Of England:

BBC. (2009, 3 5). UK Interest rates lowered to 0.5%. Retrieved 10 23, 2009, from BBC News:

Brassington, F., & Pettitt, S. (2006). Principles Of Marketing (4th Edition ed.). Pearson Education Limited.

Cottrell, S. (2008). The Study Skills Handbook (3rd Edition ed.). Palgrave Macmillan.

Digital Strategy Consulting. (2009, 9 24). UK Advertising Spend. Retrieved 10 23, 2009, from Digital Knowledge Centre - Digital Intelligence:

7. Appendix

Appendix 1

(Direct Gov, 2009)