# A development of the inventory policy for the follo...

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Sasikarn Sornsong ID: 901833217 Case3: Wagner Fabricating Company Managerial Report 1. An analysis of the holding costs, including the appropriate annual holding cost rate Holding Cost Cost of capital 14% Taxes/Insurance (24,000/600,000) = 0.04 = 4% Shrinkage (9,000/600,000) = 0.015 = 1.5% Warehouse overhead (15,000/600,000) = 0.025 = 2.5% Total Annual rate (14%+4%+1.5%+2.5%) = 22% 2.   An analysis of ordering costs, including the appropriate cost per order from the supplier  Ordering Cost A pproximately 2 hours are required at purchasing salaries average \$28 per hour  (2 * 28) = \$56.00 Total of other expenses including Telephone, Paper and Postage  (\$2,375/125) = \$ 19.00 Total Cost per order: (\$56 + \$19) = \$75.00 3. An analysis of setup costs for the production operation The Wagner Fabrication company concern more about the setup cost for the production operation. There are two factors to be consider which are the total cost of labor is estimated to be \$50 per hours and a full 8 hours shift in lost production time. It will be needed to set up the equipment for producing the part. Setup cost for the production operation Cost of labor \$50 per hour Lost production time 8 hours Total setup cost per setup (\$50 * 8 hours) = \$400
4. A development of the inventory policy for the following two alternatives:  A) Ordering a fixed quantity  from the supplier Ch = 0.22*(\$18.00) = \$3.96 a) Optimal order quantity ( Q ¿ ¿ : Q ¿ = 2 DC 0 C h = ( 3200 ) 75 3.96 = 348.16 units According to the case, we already knew that the Wagner company’s forecasted annual 2
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