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 5inch 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
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 Spring '08
 Qayyum
 total inventory cost, Narragansett

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