Franklin Training Services FTS provides instruction on the u

Franklin Training Services (FTS) provides instruction on the use of computer software for the employees of its corporate clients. It offers courses in the clients’ offices on the clients’ equipment. The only major expense FTS incurs is instructor salaries; it pays instructors $6,000 per course taught. FTS recently agreed to offer a course of instruction to the employees of Novak Incorporated at a price of $700 per student. Novak estimated that 20 students would attend the course.

Part 3:

FTS sells a workbook with printed material unique to each course to each student who attends the course. Any workbooks that are not sold mst be destroyed. Prior to the first class, FTS printed 20 copies of the books based on the client\'s estimate of the number of people who would attend the course. Each workbook costs $30 and is sold to course participants for $50. This cost includes a royalty fee paid to the author and the cost of duplication.

Required

k. Calculate the workbook cost in total and per student, assuming that 18, 20, or 22 students attempt to attend the course. Round your computation to two decimal points.

l. Classify the cost of workbooks as fixed or variable relative to the number of students attending the course.

m. Discuss the risk of holding inventory as it applies to the workbooks.

n. Explain how a just-in-time inventory system can reduce the cost and risk of holding inventory.

Solution

(K)

Student=18

=$ 30*18

=$ 540

=$ 30*20

=$ 600

=$ 30*22

=$ 660

= $ 700 * 18

= $ 12600

= $ 700 * 20

= $ 14000

= $ 700 * 22

= $ 15400

=$ 30 * 2

= $ 60

(I)

Variable Cost is the fees paid to Instuctor of $ 700 per student.

Fixed Cost is the cost of workbook upto 20 books.

(M)

When we hold the inventories so we have to incur cost of storage and wroking capital blockage in inventories these risk are know as risk of holding inventories.

(N)

Just in Time helps in the reduction of cost as follows-

1. Immediate detection of defective goods being manufactured so that early correction is ensured with least scrapping.

2. Reduce WIP.

3. Overhead cost in the form of rentals, insurance , maintainace etc are reduced.

4 Product is manufactured based on demand so that unsold workbooks case never be arise hence cost of destroyed workbook can be saved.