Chapter 9 Profit Planning.pdf

7/25/2019 Chapter 9 Profit Planning.pdf

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Profit Planning

Chapter

9


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McGraw-Hill Ryerson Limited., 2001

LEARNING OBJECTIVES

1. Understandwhy organizations budget and the

processes they use to create budgets.2. Preparea sales budget, including a schedule

of expected cash receipts.

3. Preparea production budget..4. Preparea direct materials budget, including a

schedule of expected cash disbursements for

purchases of materials.5. Preparea direct labour budget.

After studying this chapter, you should be able to:


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LEARNING OBJECTIVES

6. Prepare a manufacturing overhead budget.

7. Preparean ending finished goods inventorybudget.

8. Preparea selling and administrative expense

budget.

9. Prepare a cash budget.

10. Preparea budgeted income statement and a

budgeted balance sheet.

11. (Appendix 9A) Computethe optimum inventorylevel and order size.

After studying this chapter, you should be able to:


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The Basic Framework of Budgeting

Detail

BudgetDetailBudget

DetailBudget

MasterBudget

Summary ofa companys

plans.

Sa

les

Pro

duction

Mate

ria

ls


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Planning and Control

!Planning--

involvesdevelopingobjectives andpreparing variousbudgets to achieve

these objectives.

!!ControlControl -- involves

the steps taken bymanagement thatattempt to ensurethe objectives areattained.


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Advantages of Budgeting

Advantages

Communicatingplans

Think about andplan for the future

Means of allocatingresources

Uncover potentialbottlenecks

Coordinateactivities

Define goal

and objectives


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Responsibility Accounting

Managers should be held responsible for

those items and onlythose items thatthe manager can actually control

to a significant extent.


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9-8


Choosing the Budget Period

Operating BudgetOperating Budget

1999 2000 2001 2002

The annual operating budget

may be divided into quarterlyor monthly budgets.


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Choosing the Budget Period

1999 2000 2001 2002

Continuous orContinuous orPerpetual BudgetPerpetual Budget

This budget is usually a twelve-month

budget that rolls forward one monthas the current month is completed.


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Participative Budget System

Flow of Budget DataFlow of Budget Data

Supervisor Supervisor

Middle

Management

Supervisor Supervisor

Middle

Management

Top Management


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The Budget Committee

A standing committee responsible for

"overall policy matters relating to the budget

"coordinating the preparation of the budget


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The Master BudgetSales

Budget

Selling and

Adm inistrative

Budget


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The Master Budget

Direct

M aterials

Budget

Ending

Inventory

Budget

Production

Budget

Selling and

Adm inistrative

Budget

Direct

Labour

Budget

M anufacturing

Overhead

Budget

Sales

Budget


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The Master Budget

Direct

M aterials

Budget

Ending

Inventory

Budget

Production

Budget

Selling and

Adm inistrative

Budget

Direct

Labor

Budget

M anufacturing

Overhead

Budget

Cash

Budget

Sales

Budget

Budgeted Financial Statements


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The Sales Budget

Detailed schedule showing expected

sales for the coming periodsexpressed in units and dollars.


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Budgeting Example#Royal Company is preparing budgets for the

quarter ending June 30.$Budgeted sales for the next five months are:

April 20,000 units

May 50,000 units June 30,000 units

July 25,000 units

August 15,000 units.

%The selling price is $10 per unit.


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The Sales Budget

April May June Quarter Budgeted

sales units 20,000 50,000 30,000 100,000Selling price

er unitTotal sales


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The Sales Budget

April May June Quarter Budgeted

sales units 20,000 50,000 30,000 100,000Selling price

er unit 10$ 10$ 10$ 10$Total sales 200,000$ 500,000$ 300,000$ 1,000,000$


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The Production Budget

SalesSalesBudgetBudget ProductionProductionBudgetBudget

Com

pleted

Production must be adequate to meet budgetedsales and provide for sufficient ending inventory.


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!Royal Company wants ending inventory

to be equal to 20% of the followingmonths budgeted sales in units.

!On March 31, 4,000 units were on hand.

Lets prepare the production budget.Lets prepare the production budget.


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April May June Quarter

Budgeted sales 20,000 50,000 30,000 100,000Adddesired ending

inventory 10,000

Total needed 30,000Lessbeginning

inventory 4,000

Required production 26,000


Budgeted sales 50,000Desired percent 20%Desired inventory 10,000

Budgeted sales 50,000Desired percent 20%Desired inventory 10,000


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inventory 10,000


inventory 4,000



March 31

ending inventory

March 31ending inventory


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inventory 10,000 6,000

Total needed 30,000 56,000Lessbeginning

inventory 4,000


20%


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Total needed 30,000 56,000Lessbeginning


Required production 26,000 46,000



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inventory 10,000 6,000 5,000 5,000

Total needed 30,000 56,000 35,000 105,000Lessbeginning

inventory 4,000 10,000 6,000 4,000

Required production 26,000 46,000 29,000 101,000



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Expected Cash Collections

!All sales are on account.

!Royals collection pattern is:

70% collected in the month of sale,

25% collected in the month following sale, 5% is uncollectible.

!The March 31 accounts receivable

balance of $30,000 will be collected infull.

!All sales are on account.

!Royals collection pattern is: 70% collected in the month of sale,

25% collected in the month following sale, 5% is uncollectible.

!The March 31 accounts receivable

balance of $30,000 will be collected infull.


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Expected Cash CollectionsApril May June Quarter

Accounts rec. - 3/31 30,000$ 30,000$

Total cash collections


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Accounts rec. - 3/31 30,000$ 30,000$

April sales 70% x $200,000 140,000 140,000

25% x $200,000 50,000$ 50,000

Total cash collections 170,000$

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Accounts rec. - 3/31 30,000$ 30,000$

April sales 70% x $200,000 140,000 140,000

25% x $200,000 50,000$ 50,000

May sales

70% x $500,000 350,000 350,00025% x $500,000 125,000$ 125,000

Total cash collections 170,000$ 400,000$

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Accounts rec. - 3/31 30,000$ 30,000$

April sales 70% x $200,000 140,000 140,000

25% x $200,000 50,000$ 50,000

May sales

70% x $500,000 350,000 350,00025% x $500,000 125,000$ 125,000

June sales

70% x $300,000 210,000 210,000

Total cash collections 170,000$ 400,000$ 335,000$ 905,000$

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The Direct Materials Budget!At Royal Company, five kilograms of

material are required per unit of product.

!Management wants materials on hand atthe end of each month equal to 10% of the

following months production.!On March 31, 13,000 kilograms of material

are on hand. Material cost $0.40 perkilogram. Lets prepare the direct materials budget.

!At Royal Company, five kilograms ofmaterial are required per unit of product.

!Management wants materials on hand atthe end of each month equal to 10% of the

following months production.!On March 31, 13,000 kilograms of material

are on hand. Material cost $0.40 per

kilogram. Lets prepare the direct materials budget.Lets prepare the direct materials budget.

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April May June Quarter Production 26,000 46,000 29,000 101,000

Materials per unitProduction needs

Adddesired

ending inventory

Total neededLessbeginning

inventory

Materials to be

purchased

The Direct Materials Budget

From productionbudget


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Materials per unit 5 5 5 5Production needs 130,000 230,000 145,000 505,000

Adddesired

ending inventory

Total neededLessbeginning

inventory

Materials to be

purchased

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Adddesired

ending inventory 23,000


inventory

Materials to be

purchased


10% of the followingmonths production

10% of the followingmonths production

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Adddesired

ending inventory 23,000


inventory 13,000

Materials to be

purchased 140,000


March 31inventory

March 31inventory

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Production 26,000 46,000 29,000 101,000


Adddesired

ending inventory 23,000 14,500 11,500 11,500


inventory 13,000 23,000 14,500 13,000Materials to be

purchased 140,000 221,500 142,000 503,500

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Adddesired

ending inventory 23,000 14,500 11,500 11,500


inventory 13,000 23,000 14,500 13,000

Materials to be

purchased 140,000 221,500 142,000 503,500


July Production a nd InventorySales in units 25,000

Add desired ending inventory 3,000

Total units needed 28,000

Less beginning inventory 5,000

Production in units 23,000Kilograms per unit 5

Total kilograms, July 115,000

Desired percent 10%

Desired ending inventory, June 11,500

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Expected Cash Disbursement for Materials

!Royal pays $0.40 per kilogram for itsmaterials.

!One-half of a months purchases are paidfor in the month of purchase; the other

half is paid in the following month.!The March 31 accounts payable balance

is $12,000.

Lets calculate expected cashdisbursements.

!Royal pays $0.40 per kilogram for itsmaterials.

!One-half of a months purchases are paidfor in the month of purchase; the other

half is paid in the following month.!The March 31 accounts payable balance

is $12,000.

Lets calculate expected cashLets calculate expected cashdisbursements.disbursements.

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Accounts pay. 3/31 12,000$ 12,000$

April purchases

May purchases

June purchases

Total cash

disbursements

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Accounts pay. 3/31 12,000$ 12,000$

April purchases

50% x $56,000 28,000 28,000

50% x $56,000 28,000$ 28,000

May purchases

June purchases

Total cash

disbursements 40,000$


140,000 lbs. $.40/lb. = $56,000

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Accounts pay. 3/31 12,000$ 12,000$

April purchases

50% x $56,000 28,000 28,000

50% x $56,000 28,000$ 28,000

May purchases

50% x $88,600 44,300 44,300

50% x $88,600 44,300$ 44,300June purchases

Total cash

disbursements 40,000$ 72,300$

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Accounts pay. 3/31 12,000$ 12,000$

April purchases

50% x $56,000 28,000 28,000

50% x $56,000 28,000$ 28,000

May purchases

50% x $88,600 44,300 44,300

50% x $88,600 44,300$ 44,300June purchases

50% x $56,800 28,400 28,400

Total cash

disbursements 40,000$ 72,300$ 72,700$ 185,000$

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The Direct Labour Budget

! At Royal, each unit of product requires 0.05 hours ofdirect labour.

! The Company has a no layoff policy so all employeeswill be paid for 40 hours of work each week.

! In exchange for the no layoff policy, workers agreed to

a wage rate of $10 per hour regardless of the hoursworked (No overtime pay).

! For the next three months, the direct labour workforcewill be paid for a minimum of 1,500 hours per month.

Lets prepare the direct labour budget.

! At Royal, each unit of product requires 0.05 hours ofdirect labour.

! The Company has a no layoff policy so all employeeswill be paid for 40 hours of work each week.

! In exchange for the no layoff policy, workers agreed to

a wage rate of $10 per hour regardless of the hoursworked (No overtime pay).

! For the next three months, the direct labour workforcewill be paid for a minimum of 1,500 hours per month.

Lets prepare the direct labour budget.Lets prepare the direct labour budget.

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Production 26,000 46,000 29,000 101,000Direct labour hours

Labour hours required

Guaranteed labour hoursLabour hours paid

Wage rate

Total direct labour cost



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Production 26,000 46,000 29,000 101,000Direct labour hours 0.05 0.05 0.05 0.05

Labour hours required 1,300 2,300 1,450 5,050

Guaranteed labour hoursLabour hours paid

Wage rate


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Guaranteed labour hours 1,500 1,500 1,500Labour hours paid 1,500 2,300 1,500 5,300

Wage rate



Higher of labour hours requiredor labour hours guaranteed.

Higher of labour hours requiredor labour hours guaranteed.

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Guaranteed labour hours 1,500 1,500 1,500Labour hours paid 1,500 2,300 1,500 5,300

Wage rate 10$ 10$ 10$ 10$

Total direct labour cost 15,000$ 23,000$ 15,000$ 53,000$

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Manufacturing Overhead Budget

! Royal Company uses a variable

manufacturing overhead rate of $1 per unitproducedproduced.

! Fixed manufacturing overhead is $50,000 per

month and includes $20,000 of non-cashcosts (primarily amortization of plant assets).

Lets prepare the manufacturingLets prepare the manufacturingoverhead budget.overhead budget.

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Production in units 26,000 46,000 29,000 101,000

Variable mfg. OH rate 1$ 1$ 1$ 1$

Variable mfg. OH costs 26,000$ 46,000$ 29,000$ 101,000$Fixed mfg. OH costs

Total mfg. OH costs

Lessnoncash costsCash disbursements

for manufacturing OH


From production

budget

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Variable mfg. OH costs 26,000$ 46,000$ 29,000$ 101,000$Fixed mfg. OH costs 50,000 50,000 50,000 150,000

Total mfg. OH costs 76,000 96,000 79,000 251,000

Lessnoncash costsCash disbursements

for manufacturing OH

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Variable mfg. OH costs 26,000$ 46,000$ 29,000$ 101,000$Fixed mfg. OH costs 50,000 50,000 50,000 150,000

Total mfg. OH costs 76,000 96,000 79,000 251,000

Lessnoncash costs 20,000 20,000 20,000 60,000Cash disbursements

for manufacturing OH 56,000$ 76,000$ 59,000$ 191,000$

Amortization is a non-cash charge.Amortization is a non-cash charge.

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Ending Finished Goods Inventory Budget

!Now, Royal can complete the ending

finished goods inventory budget.

!At Royal, manufacturing overhead isapplied to units of product on the basis ofdirect labour hours.

Lets calculate ending finished goodsinventory.

!Now, Royal can complete the ending

finished goods inventory budget.

!At Royal, manufacturing overhead is

applied to units of product on the basis ofdirect labour hours.

Lets calculate ending finished goodsLets calculate ending finished goodsinventory.inventory.

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Production costs per unit Quantity Cost Total

Direct materials 5.00 lbs. 0.40$ 2.00$Direct labour

Manufacturing overhead

Budgeted finished goods inventory

Ending inventory in units

Unit product cost

Ending finished goods inventory


Direct materialsbudget and information

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Direct materials 5.00 lbs. 0.40$ 2.00$Direct labour 0.05 hrs. 10.00$ 0.50

Manufacturing overhead



Unit product cost



Direct labourbudget

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i i i G


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Manufacturing overhea 0.05 hrs. 49.70$ 2.49

4.99$



Unit product cost 4.99$



Total mfg. OH for quarter $251,000Total labour hours required 5,050 hrs.

= $49.70 per hr.*

*rounded

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E di Fi i h d G d I B d


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Manufacturing overhea 0.05 hrs. 49.70$ 2.49

4.99$


Ending inventory in units 5,000

Unit product cost 4.99$

Ending finished goods inventory 24,950$


ProductionBudget

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S lli d Ad i i t ti E B d t


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Selling and Administrative Expense Budget

! At Royal, variable selling and administrativeexpenses are $0.50 per unit sold.

! Fixed selling and administrative expenses are$70,000 per month.

! The fixed selling and administrative expenses

include $10,000 in costs primarily amortization that are not cash outflows of the current month.

Lets prepare the companys selling andadministrative expense budget.

! At Royal, variable selling and administrativeexpenses are $0.50 per unit sold.

! Fixed selling and administrative expenses are$70,000 per month.

! The fixed selling and administrative expenses

include $10,000 in costs primarily amortization that are not cash outflows of the current month.

Lets prepare the companys selling andadministrative expense budget.

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April May June Quarter Budgeted sales 20,000 50,000 30,000 100,000

Variable sellingand admin. rate 0.50$ 0.50$ 0.50$ 0.50$

Variable expense 10,000$ 25,000$ 15,000$ 50,000$Fixed selling and

admin. expense 70,000 70,000 70,000 210,000

Total expense 80,000 95,000 85,000 260,000Less noncash

expensesCash disburse-

ments forselling & admin.

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April May June Quarter Budgeted sales 20,000 50,000 30,000 100,000

Variable sellingand admin. rate 0.50$ 0.50$ 0.50$ 0.50$

Variable expense 10,000$ 25,000$ 15,000$ 50,000$Fixed selling and

admin. expense 70,000 70,000 70,000 210,000

Total expense 80,000 95,000 85,000 260,000Less noncash

expenses 10,000 10,000 10,000 30,000Cash disburse-

ments forselling & admin. 70,000$ 85,000$ 75,000$ 230,000$

9-60

The Cash Budget


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The Cash Budget

Royal:

Maintains a 16% open line of credit for $75,000.Maintains a minimum cash balance of $30,000.

Borrows on the first day of the month and repays

loans on the last day of the month.Pays a cash dividend of $49,000 in April.

Purchases $143,700 of equipment in May and

$48,300 in June paid in cash.Has an April 1 cash balance of $40,000.

Royal:

Maintains a 16% open line of credit for $75,000.Maintains a minimum cash balance of $30,000.

Borrows on the first day of the month and repays

loans on the last day of the month.Pays a cash dividend of $49,000 in April.

Purchases $143,700 of equipment in May and

$48,300 in June paid in cash.Has an April 1 cash balance of $40,000.

9-61

The Cash Budget


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Beginning cash balance 40,000$

Addcash collections 170,000

Total cash available 210,000

Lessdisbursements

Materia ls 40,000

Direct labour

Mfg. overhea d

Selling and admin. Equipment purchase

Dividends

Total disbursements

Excess (deficiency) of

cash available over

disbursements

The Cash Budget

Schedule of ExpectedCash Collections

Schedule of ExpectedCash Collections

Schedule of ExpectedCash Disbursements

Schedule of ExpectedCash Disbursements

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The Cash Budget


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Lessdisbursements

Materia ls 40,000

Direct labour 15,000

Mfg. overhead 56,000

Selling and admin. 70,000Equipment purchase

Dividends

Total disbursements


cash available over

disbursements

The Cash Budget

Direct Labour

Budget

Manufacturing

Overhead Budget

Selling and AdministrativeExpense Budget

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The Cash Budget


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Lessdisbursements

Materia ls 40,000

Direct labour 15,000

Mfg. overhead 56,000

Selling and admin. 70,000Equipment purchase -

Dividends 49,000

Total disbursements 230,000


cash available over

disbursements (20,000)$

The Cash Budget

Because Royal maintainsa cash balance of $30,000,

the company must

borrow on itsline-of-credit

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Financing and Repayment


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Excess (deficiency)

of Cash available

over disbursements (20,000)$Financing:

Borrowing 50,000

Repayments -

Interest -

Total financing 50,000

Ending cash balance 30,000$ 30,000$ -$ -$


Ending cash balance for Aprilis the beginning May balance.

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The Cash Budget


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The Cash Budget


Beginning cash balance 40,000$ 30,000$

Addcash collections 170,000 400,000

Total cash available 210,000 430,000

Lessdisbursements

Materia ls 40,000 72,300

Direct labour 15,000 23,000

Mfg. overhead 56,000 76,000

Selling and admin. 70,000 85,000Equipment purchase - 143,700

Dividends 49,000 -

Total disbursements 230,000 400,000


cash available overdisbursements (20,000)$ 30,000$

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Because the ending cash balance is

exactly $30,000, Royal will not repaythe loan this month.


Excess (deficiency)

of Cash available

over disbursements (20,000)$ 30,000$Financing:

Borrowing 50,000 -

Repayments - -

Interest - -

Total financing 50,000 -

Ending cash balance 30,000$ 30,000$

9-67

The Cash Budget


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The Cash Budget


Beginning cash balance 40,000$ 30,000$ 30,000$ 40,000$

Addcash collections 170,000 400,000 335,000 905,000

Total cash available 210,000 430,000 365,000 945,000

Lessdisbursements

Materia ls 40,000 72,300 72,700 185,000

Direct labour 15,000 23,000 15,000 53,000

Mfg. overhead 56,000 76,000 59,000 191,000

Selling and admin. 70,000 85,000 75,000 230,000Equipment purchase - 143,700 48,300 192,000

Dividends 49,000 - - 49,000

Total disbursements 230,000 400,000 270,000 900,000


cash available overdisbursements (20,000)$ 30,000$ 95,000$ 45,000$

9-68

The Cash Budget


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Beginning cash balance 40,000$ 30,000$ 30,000$ 40,000$

Addcash collections 170,000 400,000 335,000 905,000

Total cash available 210,000 430,000 365,000 945,000

Lessdisbursements

Materia ls 40,000 72,300 72,700 185,000

Direct labour 15,000 23,000 15,000 53,000

Mfg. overhead 56,000 76,000 59,000 191,000

Selling and admin. 70,000 85,000 75,000 230,000Equipment purchase - 143,700 48,300 192,000

Dividends 49,000 - - 49,000

Total disbursements 230,000 400,000 270,000 900,000


cash available overdisbursements (20,000)$ 30,000$ 95,000$ 45,000$

The Cash Budget

At the end of June, Royal has enough cashto repay the $50,000 loan plus interest at 16%.

At the end of June, Royal has enough cashto repay the $50,000 loan plus interest at 16%.

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Excess (deficiency)

of Cash available

over disbursements (20,000)$ 30,000$ 95,000$ 45,000$Financing:

Borrowing 50,000 - - 50,000

Repayments - - (50,000) (50,000)

Interest - - (2,000) (2,000)

Total financing 50,000 - (52,000) (2,000)Ending cash balance 30,000$ 30,000$ 43,000$ 43,000$


$50,000 16% 3/12 = $2,000Borrowings on April 1 and

repayment of June 30.

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The Budgeted Income Statement


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Cash

Budget

Budgeted

IncomeStatement

Com

pleted

After we complete the cash budget,After we complete the cash budget,we can prepare the budgeted incomewe can prepare the budgeted income

statement for Royal.statement for Royal.

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Royal Company

Budgeted Income Statement

For the Three Months Ended June 30

Sales (100,000 units @ $10) 1,000,000$

Cost of goods sold (100,000 @ $4.99) 499,000

Gross margin 501,000Selling and administrative expenses 260,000

Operating income 241,000

Interest expense 2,000

Net income 239,000$

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The Budgeted Balance Sheet


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e udge ed ce S ee

Royal reported the following account

balances on June 30 prior to preparing itsbudgeted financial statements:

"Land - $50,000

"Building (net) - $175,000

"Common stock - $200,000

"Retained earnings - $146,150

Royal reported the following account

balances on June 30 prior to preparing itsbudgeted financial statements:

"Land - $50,000

"Building (net) - $175,000"Common stock - $200,000

"Retained earnings - $146,150

9-73

Royal Company

Budgeted Balance Sheet

June 30 25%of June

25%of June


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Current assets

Cash 43,000$

Accounts receivable 75,000

Raw materials inventory 4,600

Finished goods inventory 24,950Total current assets 147,550

Property and equipment

Land 50,000

Building 175,000Equipment 192,000

Total property and equipment 417,000

Total assets 564,550$

Accounts payable 28,400$

Common stock 200,000

Retained earnings 336,150

Total liabilities and equities 564,550$

sales of$300,000sales of$300,000

5,000 unitsat $4.99 each

5,000 unitsat $4.99 each

11,500 kg

at $0.40/kg

11,500 kg

at $0.40/kg

50% of Junepurchasesof $56,800

50% of Junepurchasesof $56,800

9-74

Royal Company

Budgeted Balance Sheet

June 30


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Current assets

Cash 43,000$

Accounts receivable 75,000

Raw materials inventory 4,600

Finished goods inventory 24,950Total current assets 147,550

Property and equipment

Land 50,000

Building 175,000Equipment 192,000

Total property and equipment 417,000

Total assets 564,550$

Accounts payable 28,400$

Common stock 200,000

Retained earnings 336,150

Total liabilities and equities 564,550$

Beginning balance 146,150$

Add: net income 239,000

Deduct: dividends (49,000)Ending balance 336,150$

9-75

Zero-Base Budgeting


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g g

Managers are required to justify all budgeted

expenditures, not just changes in the budgetfrom the previous year. The baseline is zerorather than last years budget.

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International Aspects of Budgeting


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p g g

Multinational companies face special

problems when preparing a budget."Fluctuations in foreign currency exchange rates.

"High inflation rates in some foreign countries.

"Differences in local economic conditions."Local governmental policies.

Appendix


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Inventory Decisions

9A

9-78

Costs Associated with Inventory


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Inventory Ordering Costs

Clerical CostsTransportation

Costs

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Inventory Carrying Costs

Storage Space Handling Cost

Insurance

PropertyTaxes

Interest onCapital invested

in Inventory

ObsolescenceLosses

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Cost of not carryingsufficient inventory

Customer

ill will

Quantitydiscounts lost Erratic

production

Lostsales

Inefficiency ofproduction runs

Addedtransportation

costs

9-81

Inventory Problems


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! How much to order - Economic Order

Quantity (EOQ)

and

! When to order - Reorder Point

9-82

Economic Order Quantity (EOQ)


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!Tabular approach

"Tabulates total cost at various ordersizes.

"Lowest cost indicates EOQ.

"Requires trial and error to determineexact order quantity.

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! Graphic approach

" Graph cost relationships between totalcost, annual carrying cost and annualpurchase order cost.

" Total cost is minimized where annualcarrying cost equals annual purchaseorder cost

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! Formula approach

" E= 2QP C

where

E= order size in unitsQ= annual quantity used in units

P= cost of placing one order

C= annual cost of carrying one unit in stock

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Reorder Point/ Safety Stock


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!Reorder Point - tells manager when to

place an order"Depends on economic order quantity, lead

times and rate of usage during lead time

!Safety Stock - provides a buffer to protectagainst a stock-out

"Reorder point is then calculated by adding

the safety stock to the average usage duringthe lead time

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End of Chapter 9End of Chapter 9


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Documents

Chapter 9 Profit Planning.pdf