According to the Financial Department, the cost for a short waiting of a customer is $20. When there are: backorder, lost sales, lost customer, the costs are: $40, S100, $600 respectively. Y Figures calculated by the Marketing Department for the last year show the following: 1. 20% of all stock-outs result in short waiting of a customer. 2. 50% of all stock-outs result in a back order. 3. 20% of all stock-outs result in a lost order. 4. 10% of all stock-outs result in a lose of a customer. Questions: a. What is the average cost of a stock-out? b. How much should we invest in inventory to reduce the number of stock-outs from 1000 a year to only 200 per year?

According to the Financial Department, the cost for a short waiting of a customer is $20. When there are: backorder, lost sales, lost customer, the costs are: $40, S100, $600 respectively. Y Figures calculated by the Marketing Department for the last year show the following: 1. 20% of all stock-outs result in short waiting of a customer. 2. 50% of all stock-outs result in a back order. 3. 20% of all stock-outs result in a lost order. 4. 10% of all stock-outs result in a lose of a customer. Questions: a. What is the average cost of a stock-out? b. How much should we invest in inventory to reduce the number of stock-outs from 1000 a year to only 200 per year?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 14P

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