The Oppermann Corp. has developed a new type of widget. The local distributor ex
ID: 2755562 • Letter: T
Question
The Oppermann Corp. has developed a new type of widget. The local distributor expects to increase his sales by 29% over the past year due to this new development. Last year's sles were $102,000 at a selling price of $91 per unit. A safety stock of 22 units has eliminated stockouts. The manager would like to cut costs as much as possible and comes to your for advice.
Warehouse Space = $2.07 per unit
Materials Handling Experience = $1.66 per unit
Insurance Premium = $0.90 per unit
Total Ordering Cost = $79 per order
What is the carrying cost per unit?
How many units will be sold next year?
What is the economic order quantity next year?
What is the amount of average inventory?
How many orders will be made per year?
What is the total cost of this inventory decision?
Explanation / Answer
What is the carrying cost per unit?
carrying cost per unit = Warehouse Space + Materials Handling Experience + Insurance Premium
carrying cost per unit = 2.07 + 1.66 + 0.90
carrying cost per unit = 4.63
How many units will be sold next year?
No of Unit sold last year = 102000/91
No of Unit sold last year = 1121 Unit approx
No of Unit to be sold next year = 1121*(1+29%)
No of Unit to be sold next year = 1446 Units
What is the economic order quantity next year?
Economic order quantity next year =( 2 AO/c)^(1/2)
Economic order quantity next year = (2*1446*79/4.63)^(1/2)
Economic order quantity next year = 222 Units (approx)
What is the amount of average inventory?
Average inventory = (Safety Stock + Economic order quantity /2 )
Average inventory = (22 + 222/2)
Average inventory = 133
How many orders will be made per year?
No of Order = Total Unit/Economic order quantity
No of Order = 1446/222
No of Order = 6.51
No of Order = 7
What is the total cost of this inventory decision?
Total cost of this inventory decision = No of Order*Ordering cost per unit + Average inventory *Carring Cost per unit
Total cost of this inventory decision = 7*91 + 133*4.63
Total cost of this inventory decision = 1253
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.