Case 3 - Case 3-Group 6 1 a.Inventory system for EG151...

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Case 3-Group 6 1) a.Inventory system for EG151 exhaust gasket: The EG151 exhaust gasket is purchased from an overseas supplier, Haipei, Inc. Actual demand for the first 21weeks of 2001 is shown in the following table: EG151 Week Actual Demand 1 104 2 103 3 107 4 105 5 102 6 102 7 101 8 104 9 100 10 100 11 103 12 97 13 99 14 102 15 99 16 103 17 101 18 101 19 104 20 108 21 97 Total 2142 Average 102 A quick review of past orders, shown in another document, indicates that a lot size of 150 units is being used and that the lead time from Haipei is fairly constant at two weeks. Currently, at the end of week 21, no inventory is on hand; 11 units are backordered, and there is a scheduled receipt of 150 units.
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First we sum up the gasket sales/demand for the 21 weeks. This gives us a total of 2142 gaskets for 21 week period. +Total Actual Demand = Sum of each gasket If we divide it by 21 we get average weekly sales of 102 gaskets. +Average weekly sales = Total Actual Demand/ numbers of week As the lead time for gaskets is two weeks we multiply this quantity by 2 and we get a figure of 204. +Lead time (2 weeks) = Average weekly sales x 2 We take a safety stock level of one week as this is the half of the lead time and we add this to the figure of 204 and we get a re-order quantity of 306. +Re-order quantity = Safety stock level (half of lead time) + Lead time This should be the reorder quantity for EG151. This also means that the average stock will be 204/2 that is 102 plus safety stock 102 that is 204 units. +Average Stock = Safety stock + Average weekly sales Now in case of EG151 the gross profit is 32 percent and so the investment in the inventory will be 68% of $12.99 that is $8.83. +Investment = Wholesale x (100% - % of gross profit) The cost of carrying this will be 21 percent that is $1.85. +Cost of carrying = Investment x 21% If we multiply this by 204 units found above we get a yearly cost of $337.40. +Cost of carrying (Yearly) = Cost of carrying x Lead time
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This note was uploaded on 05/02/2011 for the course FINANCE 9924603 taught by Professor Ssgdbfb during the Spring '11 term at Kyung Hee.

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Case 3 - Case 3-Group 6 1 a.Inventory system for EG151...

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