1. What are good estimate of order cost and inventory-holding cost? (State all a
ID: 469544 • Letter: 1
Question
1. What are good estimate of order cost and inventory-holding cost? (State all assumptions and show all computations,)
2. What is the EOQ and reorder point for Strike Disinfectant given your answer to question 1?
3. Compute the total order and inventory-holding costs for a fixed-quantity system (FQS) and compare to the current order Q's.. Can you save money by adopting an FQS?
4. What are your final recommendations, including what you would recommend regarding regular and special orders, the state bidding system, and overall control of the university materials-management system? Explain the reasoning for your recommendations.
Strike Disinfectant Data
Case size Cost per case Order lead time
4 gallons $84.20 2 weeks
Beginning SKU Week 1 96
Receipts Week 7 200
Ending Balance Week 16 110
Weekly Demand
1 31
2 27
3 1
4 12
5 11
6 8
7 4
8 15
9 15
10 16
11 10
12 9
13 8
14 5
15 10
16 4 Total 186, Mean 11.63, Standard Deviation 8.02, Cycle Service Level 97%
Explanation / Answer
1. Time spent by purchasing, accounts payable and receiving personnel for processing a single purchase order is 3 hours . one worker-hour cost is $ 20. So the Ordering cost per order is $ 20 *3 = $ 60
Ordering cost = $ 60
Inventory Holding cost = $ 18.88
2. EOQ = (2*Annual Demand *Ordering cost / Holding cost )^0.5 = (2*52*11.63*60/18.88)^0.5 = 62
Reorder Point = 44.59
Inventory value 4.15 m Total Warehouse space 36750 sqft Rentals 4.6 per sqft Number of warehouse employees 5 employees salaries 32000 worker benefits (%) 20% worker benefits ($) 6400 other warehouse costs 200000 Total Fixed cost 561050 Fixed cost as % of total inventory value 13.52% Cost of capital 8.90% Total inventory holding rate (annual) (i) 22.42% Cost per case (C) 84.2 Inventory holding cost (iC) $18.88Related Questions
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