The Economic Order Quantity Accounting Essay

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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: 

Q= the economic order quantity

Inventory cost = Purchasing cost

Average Inventory *The Value Of Average Inventory * 15% = Order Times* 68

Average Inventory *Costs Of Per Unit * Average Inventory * 15% = Order Times* 68

Costs Of Per Unit = $3

Average Inventory= Q/2

Order Times = 6000/3Q

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

Q= 49.45

Inventory cost

Purchasing cost

the economic order quantity

the economic Order Times

$ 275.05

$ 275.05



b. the recorder point; 

The Recorder Point = Average Units Per Day * The Load Time

Average Units Per Day = Total Units / Working Days

Total Units = 6000 /3 = 2000 Units

Working Days = 250 Days

Average Units Per Day = 2000/250= 8

The Load Time = 6 Days

The Recorder Point = 8 * 6 =48 Days

c. annual inventory costs including purchase outlay. 

Annual Inventory Costs Including Purchase Outlay = Inventory cost + Purchasing cost

Purchasing cost = Inventory cost

Inventory cost =$ 275.05

Annual Inventory Costs Including Purchase Outlay =2*275.05=$ 550.1

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.

Cash Receipts

Cash Payments


Cash debit

Check no.

Cash credit

May 4

$ 4,150


$ 850





















Bank Statement for May

Beginning balance


Deposits and other Credits

May 1 EFT

$ 200

















22 BC



Checks and other Debts

May 4(check no. 1416)

$ 850



9(check no. 1417)


11(check no. 1416)


14(check no. 1418)


17(check no. 1419)


19 EFT


22(check no. 1417)


29(check no. 1418)


31(check no. 1419)


(check no. 1420)


(check no. 1421)


(check no. 1422)


31 SC


$ (11,680 )

Ending balance

$ 20,970

Deposits and other Credits = 200+4150+4150+540+540+560+560+2190+2190+1700=$18650

Checks and other Debts = 850+700+160+850+670+1960+400+160+670+1690+1450+1200+640+10=$ 11680

Ending balance = Deposits and other Credits + Beginning balance - Checks and other Debts

= 18650 + 14000 - 11680 = $ 20970

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. 

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

Lean Accounting

I conducted my Internet research and below are the summarization of why lean accounting is so important. There are both positive and negative reasons why Lean Accounting is important. The positive reasons are that Lean Accounting

Provides information for better Lean decision making. These better decisions lead to improved revenue and profitability.

Reduces time, cost, and waste by eliminating wasteful transactions and systems.

Identifies the potential financial benefits of Lean improvement initiatives and focuses on the strategies required to realize those benefits.

Motivates long-term Lean improvement by providing Lean-focused information and statistics.

Addresses customer value directly by linking performance measurements to the drivers of value creation and driving changes to maximize this value.

All the negative reasons relate to the shortcomings of traditional accounting, control, and measurement systems. Traditional systems do not work for companies pursuing Lean thinking; indeed, they are actively harmful. Traditional systems are not the wrong way to work, but they are designed to support mass production. Lean manufacturing and other Lean methods violate the rules of mass production. When you try to use traditional accounting systems and Lean manufacturing, you will find that they conflict with each other.

Problems caused by traditional accounting, control, and measurement systems include the following:

They motivate people to use non-Lean procedures, such as running large batches and building inventory.

Traditional systems are wasteful. They require huge amounts of unnecessary work, gathering and analyzing data, producing unhelpful reports, and generating additional non-value-adding tasks.

Standard costs can harm Lean companies because they are based on premises grounded in mass production methods. Lean manufacturing violates all the assumptions of mass production. Whereas mass production is based on achieving economies of scale through long production runs, Lean focuses on making products one at a time. It is no wonder, then, that these accounting methods lead people to do the wrong things, such as outsource items that should be in-sourced. In addition, the methods are complex and confusing to generate, they provide a misleading understanding of cost, and they lead to wrong management decisions on important issues, such as make/buy, profitability of sales orders, rationalization of products or customers, and so forth.

Business Report Writing

The business report is the usual vehicle for organizing and conveying important information that's needed by different people in an organization. The format typically consists of all or most of the following elements: Cover,Title page,List of illustrations or figures,Body,Conclusion Appendix,Sources or references

Structurally, the business report is much like a paper, only on a smaller scale. The organization and the peripheral matters allow people to more easily access information of possible interest to them

Smart Managing: The cover letter or letter of transmittal provides an opportunity for you to talk to the readers. You can mention relevant details contained in the report and even provide a brief summary. In writing the business report, be sure to appeal to the data and paragraph. to make sure all your information is accurate because it is related to the business.

Title page: The title page usually states the name of the organization, the division or department, the title of the report, the date, and the name(s) of the author(s). Again, the information will vary according to the circumstances and whether the report is meant for internal or external use.

List of illustrations or figures: This list serves as a guide to the graphics; it provides quick and easy access to graphs, charts, and other figures.

Body: The body is the report proper, marked by heads and subheads, with the pages numbered and you should make it count.

Conclusion: This section provides a summary of the main points of the business report and offers opinions and further considerations. You'll want to include your recommendations here, unless you want to emphasize them by putting them under a separate heading.

Appendix: This section contains statistics, tables, and any other information that might interest readers but doesn't fit appropriately in the body of your report.

Sources or references: The last section is a listing of any data, reports, or other sources you used in your report business report. You should also include suggestions for further decesion, because your business report is for a wider group of readers within the organization or for external use.

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?

It seems a rational decision because the test is 95% accurate, actually it is totally wrong. The guy made the wrong decision.

We can know the probability he has his disease , probability is 95% *0.1%= 0.95%

It is a really small ration for the man to get the disease.

When this question was put to a group of medical doctors, 80% of them answered "95%". Comment.

The doctor know exactly about the probability of disease and the test is 95% accurate, but they neglect another probability which is one in one thousand men of his age has this dreaded disease. So they get the wrong idea, After the calculation , we can know the real probability that the man gets the disease.

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 color you believe the marble to be. The marble is then shown, replaced, and the urn's contents again randomized. The aim is to maximize the number of correct guesses. Before reading any further, what strategy would you employ? What would you guess? 

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. Because the red marbles is 3/4 and the black marbles is 1/4, in order to maximize the number of correct guesses. I would guess red marbles.

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

If 4 red come out in a row, my next guess would be red, because the red marbles is three times of the black marbles.

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).

Seeing from above two cases, what it appears cannot really decide people's final decision. For the man in the first case, the test is 95% accurate so he believes that he has already got the disease, and he quitted his job as well as sold out all his assets. But in fact, what he has overlooked is one factor: probability. The fact is that one in one thousand men of his age has this dreaded disease and through scientific calculation, however, his probability of getting the disease is quite slim. That is to say, out thoughts cannot be limited by the daily phenomenon. This is just a problem of probability and it is not 100% accurate. The conclusion is that we should not make our decisions based on one or two samples.

In regard to the second case, this is a classic probability issue. We can just conclude that the probability of getting the red marble is higher, but we cannot make sure that the marble must be red. Hence, during the process of our business decision making, we should put more attention on probability issues. What is more, we should take into consideration all possible consequences of all decisions. Otherwise, the conclusion we conclude based on our past experiences might have a negative influence on our business decisions, even prose threats to our business and organizations.

The book Black Swan is one of the New York Times bestseller. This book describes a typical phenomenon that all people living in the 17th century believed that all swans were white according to their past experiences. The people at that time believed that this was one of the truths in the university. Until the year 1697, explorers discovered black swan in Australia, which shocked all people at that time. Then, people started to realize that their previous belief of all swans were white was not a truth, rather than a case of probability. So we cannot be limited by our experiences when making business decisions.

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)


The aim of this report is to research the Six Sigma for all the businessmen whether the Six Sigma is used as a metric, a methodology or as a management system (Harry, 2000).We will review the metric and methodology because they will help us to understand Six Sigma as a management system.


Six Sigma always used to measure the performance process of the organization, at the same time, it will assess the results of improvement efforts. That means it is a way to measure quality (Harrold, 1999). Six Sigma gets the common influence in the business, because it is a standard that reflects the degree of control over any process to meet the standard of performance established for that process.

Six Sigma is a universal scale which is like a road measuring meters, a weight measuring kilogram, or a thermometer measuring temperature. We can use these common scales like weigh, height, temperature and so on to measure and compare very different things. Similarly, we also can use Six Sigma to compare the very complex business operations like whether it is right or wrong for the business process.

Defects Per Million Opportunities (DPMO) can be measured by the Sigma and Six Sigma means that there are 3.4 defects per million opportunities.


In conclusion, Six Sigma is really excellent for the operation of the business. It provides the measurement for the complex business standards (Harrold, 1999). It does be a valuable application as a measuring unit for organization. When we use it to measure the quality and standards for the business targets .we could understand the business process clearly and easily. After the explanation of the Six Sigma, it is recommended that in the future our company should use the Six Sigma to measure the quality of the business process. This will help to the better operations and management.