Unformatted text preview: e than 50% of the reserved
space) hence carrying cost is fixed (i.e. security, heating, cooling etc.) regardless
of the volume of the finished goods inventory. Hence Blanchard importing &
distributing co. can focus on reduction of other costs.
2) The substantial cost incurred at Blanchard is that of setting up cost in which the
size changeover takes one complete day. Hence it is necessary to reduce this time
by reducing the size changeover. Bob and Hank are exactly doing the same.
3) Bob and Hank are not following the EOQ/ ROP set as per 1969 as it is now
obsolete, the basis on which these values were based was with the certain pattern
of demand for items as per 1969 data. Also it did not account for the pattern of
production (i.e. all items of same size in one batch). Usage of latest data for
predicting demand and accounting for the pattern of production ensures that the
setting up costs are low and service level is high. Disadvantages1) Due to the patter of production of batch wise production based on size as well as
to maintain high level of service a higher level of finished goods...
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- Summer '14
- Cost Accounting, Vodka, EOQ/ ROP