EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Chapter 11, Problem 1.1DQ
Summary Introduction
Interpretation:
Good estimates of order cost and inventory holding cost.
Concept Introduction:
Ordering costs are defined as the costs incurred on placing orders i.e. amount of money spent on placing orders with the supplier(s).
Inventory-holding costs are defined as per unit cost of holding an item in stock or the percent of unit cost incurred on carrying the item.
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Kamran Paint Company uses 60,000 gallons of pigment per year. The cost of ordering
pigment is Tk.200 per order, and the cost of carrying the pigment in inventory is Tk.1.00 per
year. The firm uses pigment at a constant rate every day throughout the year.? p
=TK,s
a.
How much pigment should the firm order every time to minimize on total costs?
b.
Calculate the total cost of the plan?
C.
Determine the total number of orders suggested by the plan.
d
Assuming that it takes 20 days to receive an order once it has been placed, determine the
level of pigment storage at which the firm has to place the next order of pigment.
e.
What are the average and maximum values of inventory for the firm?
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- What is the purpose of inventory control?arrow_forwardInstruction: Answer what is being required. You may compute them manually or use the Excel QM.Pencil number 2 at the campus book-store are sold at a fairly steady rate of $60 per week. It cost the bookstore $12 to initiate an order to its supplier and holding costs are $0.005 per pencil per year.Determine◦ How much is the Annual holding cost?◦ How much is the Annual ordering cost? ◦ What is the total annual inventory cost?If the order lead time is 4 months, determine the reorder point.Please Illustrate the inventory profile graphically.What additional cost would the book-store incur if it orders in batches of 1000?arrow_forwardDescribe what are just in time inventory advantages and disadvantage for a business?arrow_forward
- Based on an EOQ-type ordering criterion, what costmust be taken to zero if the desire is to have an orderquantity of a single unit?arrow_forwardQ2) Groundz Coffee Shop uses 4 kgs of a specialty tea weekly; each kg costs $16. Carrying costs are $1 per kg per week because space is very scarce. It costs the firm $8 to prepare an order. Assume 52 weeks per year. How many kgs of tea should Groundz order at a time? What is total annual cost. How many orders should Groundz place annually. Q2) Groundz Coffee Shop uses 4 kgs of a specialty tea weekly; each kg costs $16. Carrying costs are $1 per kg per week because space is very scarce. It costs the firm $8 to prepare an order. Assume 52 weeks per year. How many kgs of tea should Groundz order at a time? What is total annual cost. How many orders should Groundz place annually.arrow_forwardEdwarldo’s Manufacturing uses 2,400 units of a product per year on a continuous basis. The product Carrying Cost are $60 per year and Ordering Cost are $250. It takes 20 days to receive a shipment after an order is placed and the firm requires a safety stock of 8 days of usage in inventory. Show Computations and Explanations. A. Calculate the Economic Order Quantity (round up the answer to the nearest whole unit) (Format: 111) B. Calculate the Total Cost per year to order and carry this item. (Format: 1,111) C. Their supplier has notified the company that if they increase their order quantity by 58 units, they will give the company a discount. Calculate the Dollar Discount that the company will have to at least give to Edwarldo’s Manufacturing to be indifferent. (Format: 111)arrow_forward
- Based on inventory management context, describe the suitable situation to use the ‘Economic Order Quantity’ and ‘Production Order Quantityarrow_forwardExplain what are just in time inventory pros and cons for a business?arrow_forwardWhat does the inventory turnover ratio mean? Do you want a high number or low number? How does it translate to inventory days?arrow_forward
- Discuss what is meant by ABC analysis of inventory.Name several measures that can determine ABCstatusarrow_forwardCase Study 4: Inventory Management. I) A Furniture manufacturing company uses 1200 units of an item annually and the cost price is $250 per unit. The ordering costs are $600 per order and holding costs are $4.00 per item per annum. Required: Calculate the economic order quantity. Determine the number of orders per annum. Determine the annual stock holding cost. Determine the annual ordering cost.arrow_forwardAnnual purchasing salaries are $65,000, operating expenses for the purchasingdepartment are $25,000, and inspecting and receiving costs are $25 per order. If thepurchasing department places 9000 orders a year, what is the average cost of ordering? What is the annual cost of ordering?arrow_forward
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