case 4 almost done

case 4 almost done - 5. a.) Assuming that the desired...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
5. a.) Assuming that the desired safety stock is currently on hand, what is the total cost of ordering and carrying inventories, including the safety stock, using supplier A? using supplier B? Total Inventory Cost (TIC)= CP(Q/2) + F(U/Q) C= annual carrying cost as a proportion of inventory value P= purchase price per unit Q= number of units per order (this number was not given, but it was calculated in problem one….Q= 209 for supplier A and 148 for supplier B) U= annual usage F= fixed cost per order Supplier A TIC= (.23)(300)(209/2 + 75) + 1000(1500/209)= $19562.53 Supplier B TIC= $20523.57 b.) How does the introduction of safety stocks affect the reorder points as calculated in question 3? Safety stock will just add to the reorder point. If the company uses supplier A, there will be an additional 75 units added to the reorder point and an additional 150 units if supplier B is used. c.) Assume that there is a shipping delay. How many days after an order is placed could Narragansett continue to operate, at its expected usage rate, before its entire stock of 5-inch winches is reduced to zero? Compute for supplier A and B. First , we must find the daily usage. Daily usage = 1500/360= 4.166666667 units Supplier A 75/4.166666667= 18 days until the stock is reduced to zero Supplier B 150/4.166666667= 36 days 6. The cost of carrying inventories has been calculated using the current cost of bank
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/20/2008 for the course FIN 3123 taught by Professor Qayyum during the Spring '08 term at Mississippi State.

Page1 / 3

case 4 almost done - 5. a.) Assuming that the desired...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online