/365 NPM (1 1 +(i/365x D) m2FkK - AReceivables + Inventory Payables a NPM.( run
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/365 NPM (1 1 +(i/365x D) m2FkK - AReceivables + Inventory Payables a NPM.( run Chapter 2 Inv COGS/365 COGS/365 CCC DIH + DSO-DPO . A/R Sales/365 DSD Homework Problem Chapter 4: Inventory Management decided to You have heard so much about the just-in-time inventory concept that you have TA investigate your current inventory system. Assume a production period of 120 days. Your operation requires inventory of 5,000 units of inventory over that period. Inventory is us evenly over the production period. Your current system is to place 4 orders of 1250 units each. You order and receive the inventory on the same day along with the invoice. Invoice terms are net 15 days) Inventory costs $10 per unit and the orderisetup costs are estimated to be $400 per order. Physical inventory holding costs average about $5 per unit over the production period of 120 days. Order/setup costs and holding costs are paid at the end of the production period You wish to evaluate whether placing 8 orders of 625 results in a lower present value cost 1. If the company's appropriate discount rate is 12 percent, calculate the present value cost of the current inventory policy 2 Using the same discount rate, calculate the present value cost of the alternative 3. Which alternative do you recommend your company choose? Why? 4. Suppose that the alternative inventory policy would increase the chances of ntory policy stocking out. What actions could you take to reduce that risk? How would you revise your NPV analysis to incorporate those actions? 5. Is 112499.8 oooo 3???67 0 0032a767 0 000 3376 Pay Ordt 1 50O Pay ora lo3 11oExplanation / Answer
units per unit cost total order cost carrying cost per unit Total carrying cost Total cost Discounting rate Product Present value of cash outflow 1250 10 12500 400 5*30/365= 0.410959 513.6986301 13413.7 0.8929 11977.09151 Product*30/365=984.418480015012 1250 10 12500 400 5*30/365= 0.410959 513.6986301 13413.7 0.7972 10693.40055 Product*45/365=1318.36445111653 1250 10 12500 400 5*30/365= 0.410959 513.6986301 13413.7 0.7118 9547.870685 Product*60/365=1569.51298930381 1250 10 12500 400 5*30/365= 0.410959 513.6986301 13413.7 0.6355 8524.405479 Product*75/365=1751.5901670107 NPV= 5623.886087
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