Case Study #4 %28Wagner Fabricating Company%29.xlsx -...

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Forecasted annual demand for the part is 3200 units Wagner operates 250 days out of the year. Cost of capital of 14% for the use of funds for investments within the company Average investment in the company's inventory was $600,000. Taxes and Insurance related to inventory was $24,000. Inventory shrinkage including damage, and pilferage was (-$9,000) Warehouse overhead including utlitiy expenses for heating and lighting was $15,000 To process and coordinate an order regardless of the quantity ordered is 2 hours. Purchasing salaries, including employee benefits average $28 an hour An analysis of 125 orders, telephone, paper, and postage expenses were $2375 To obtain the part from the supplier, requires a lead time of 1 week. Demand during lead time shows it is approximately normally distrubuted, with a mean of 64 units, 1 stock-out per year is acceptable. Purchase the part from the supplier at a cost of $18 per unit. Excess capacity is now avaiable in certain production departs, and is considering the alternative of Production capacity is available at the rate of 1000 units per month. Available production time avaiable is 5 months. With a 2 week lead time, schedules can be arranged so that the part can be produced whenever n The demand during a 2 week lead time is approximately normally distrubuted, with a mean of 128 Production costs are expected to be $17 per part. Concern that setup costs will be significant. Total cost of labor and lost prodcution time is estimated to be $50 per hour. To set up the equipment a full eight-hour shift is required. Develop a report that will address the question of whether the company should continue to purc 1. An analysis of the holding costs, including the apporpriate annual holding cost rate.

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