Samantha Ross is the procurement manager for the headquarters of a large Financial company chain with a central inventory operation. Ross’ quick-moving inventory item has a demand of 7,000 units per year. Each unit cost $120, and the inventory holding cost is $15 per unit per year. The average ordering cost is $31 per order. It takes about 6 days for an order to arrive. (This is a corporate operation, and there are 250 working days per year.) a) What is the annual cost of ordering and holding inventory? b) Including the cost of the 7,000 units. What is the total annual inventory cost? c) What is the total annual cost?

Samantha Ross is the procurement manager for the headquarters of a large Financial company chain with a central inventory operation. Ross’ quick-moving inventory item has a demand of 7,000 units per year. Each unit cost $120, and the inventory holding cost is $15 per unit per year. The average ordering cost is $31 per order. It takes about 6 days for an order to arrive. (This is a corporate operation, and there are 250 working days per year.) a) What is the annual cost of ordering and holding inventory? b) Including the cost of the 7,000 units. What is the total annual inventory cost? c) What is the total annual cost?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 6E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Samantha Ross is the procurement manager for the headquarters of a large Financial company chain with a central inventory operation. Ross’ quick-moving inventory item has a demand of 7,000 units per year. Each unit cost $120, and the inventory holding cost is $15 per unit per year. The average ordering cost is $31 per order. It takes about 6 days for an order to arrive. (This is a corporate operation, and there are 250 working days per year.) a) What is the optimal number of orders per year?
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The president of Hill Enterprises, Terri Hill, projects the firm's aggregate demand requirements over the next 8 months as follows: January 1,200 May February March April 1,500 June 2,100 2,300 1,600 1,900 July August 1,700 1,300 Her operations manager is considering a new plan, which begins in January with 200 units of inventory on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan C. Plan C: Keep a stable workforce by maintaining a constant production rate equal to the average gross requirements excluding initial inventory and allow varying inventory levels. Conduct your analysis for January through August. The average monthly demand requirement = 1700 units. (Enter your response as a whole number.) In order to arrive at the costs, first compute the ending inventory and stockout units for each month by filling in the table below (enter your responses as whole numbers). Ending Period…
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