Jiffy Print Shop, printing of documents, papens, The shop uses an average of 20

Question

Jiffy Print Shop, printing of documents, papens, The shop uses an average of 20 cases of per year that it is open. Each case of paper costs $40.00. It conducts paper inventory at the end of cases cases, 950 cases, its inventory for the year, inventory located close to a major university, does an enormous amount of course packs, and dissertations for students and faculty. copy paper each day during the 320 days count of its every quarter of the year. Jiffy began the year with 1,200 of paper and at the end of each of the next four quarters had 800 cases, 1,050 and 1,100 cases, respectively. Jiffy management has determined that cost is 25 percent annually. What is Jiffy's average inventory turnover rate, and annual inventory carrying cost for paper? that Jifly expects demand for the next year to remain at an average of 20 cases per day, how fourth quarter) of 1,100 cases? Foods Galore is a major distributor to restaurants and other institutional food users a. Foods Galore buys cereal from a manufacturer for $20.00 per case. Annual demand for cereal is 200,000 cases, and the company believes that the demand is constant at 800 cases per day for each of the 250 days per year that it is open for business. Average lead time from the supplier for replenishment orders is eight days, and the company believes that it is also constant. The purchasing agent at Foods Galore believes that annual inventory carrying cost is 10 percent and that it costs $40.00 to prepare, send, and receive an order. How many cases of cereal should Foods Galore order each time it places an order? What will be the aver- age inventory? What will be the inventory turnover rate? b. Foods Galore conducts an in-depth analysis of its inventory management practices and discovers several flaws in its previous approach. First, it finds that by ordering 10,000 or more cases each time, it can obtain a price of $18.00 per case from the supplier. What order quantity should Foods Galore place? Why?

Explanation / Answer

1). Average Inventory for the year = (Opening Inventory + Closing Inventory)/2
= (1200+1100)/2 = 1150 cases.
Inventory Turnover rate: Turnover/Average Inventory
Turnover = 20 cases X 320 days = 6400

Inventory Turnover rate = 6400/1150 = 5.56
Annual Inventory Carrying Cost : Average Inventory X Carrying Cost = 1150 cases X $40 X 25% = $11500
TIme upto which demand can be satisfied by ending inventory : 1150cases/20 = 57.5 days

2). Cases of cereal should foods galore order each time are:
Re order Quantity = Req. for each day X Lead time = 800 cases X 8days = 6400cases
Economic Order Quantity (EOQ) = [(2 X Annual Demand X Ordering Cost )/Carrying Cost]^1/2
EOQ = [(2 X 200000 X $40)/$2]^1/2 = 2828.42 cases or 2828 cases rounded off.
Average Inventory = 2828/2= 1414 cases
Inventory Turnover rate: 200000cases/ Average Inventory   = 200000/1414 = 141.44

b) EOQ = [(2 X 200000 X $40)/$2]^1/2 = 2828 cases
It is the most optimal quanity which it should order at this level it's total cost is minimum.

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