A retail has 8 stores supplied from 4 suppliers, where each supplier supplies different goods. Delivery from the Supplier is in trucks with a capacity of 50,000 units at a cost of $1100 per load plus $100 per delivery to the store. Inventory costs are $0.1 per unit per year. The Supply Chain Manager is considering whether to use direct shipping or Milk Run delivery for 4 stores for each truck in one shipment a) if annual sales in each store are 1000,000 units, which shipping method provides the lower cost b) if the annual sales in each store are 200,000 units, which shipping method provides the lower cost

A retail has 8 stores supplied from 4 suppliers, where each supplier supplies different goods. Delivery from the Supplier is in trucks with a capacity of 50,000 units at a cost of $1100 per load plus $100 per delivery to the store. Inventory costs are $0.1 per unit per year. The Supply Chain Manager is considering whether to use direct shipping or Milk Run delivery for 4 stores for each truck in one shipment a) if annual sales in each store are 1000,000 units, which shipping method provides the lower cost b) if the annual sales in each store are 200,000 units, which shipping method provides the lower cost

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 6E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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This year, Hassell Company will ship 4,000,000 pounds of chocolates to customers with total order-filling costs of 900,000. There are two types of customers: those who order 50,000 pound lots (small customers) and those who order 250,000 pound lots (large customers). Each customer category is responsible for buying 1,500,000 pounds. The selling price per pound is 2 per lb for the 50,000 pound lot and 3 per lb for the larger lots, due to differences in the type of chocolate. ABC would likely assign order-filling costs to the customer type as follows: a. 450,000, small; 450,000, large (using pounds as the driver) b. 360,000, small; 540,000, large (using revenue as the driver) c. 750,000, small; 150,000, large (using number of orders as the driver) d. 450,000, small; 450,000, large (using customer type as the driver)
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.
Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of 25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 6,500 orders per year. The cost of each PC system is 1,100 per year. In addition to the salaries, Elliott spends 27,560 for forms, postage, and other supplies (assuming 26,000 purchase orders are processed). During the year, 25,350 orders were processed. Required: 1. Classify the resources associated with purchasing as (1) flexible or (2) committed. 2. Compute the total activity availability, and break this into activity usage and unused activity. 3. Calculate the total cost of resources supplied (activity cost), and break this into the cost of activity used and the cost of unused activity. 4. (a) Suppose that a large special order will cause an additional 500 purchase orders. What purchasing costs are relevant? By how much will purchasing costs increase if the order is accepted? (b) Suppose that the special order causes 700 additional purchase orders. How will your answer to (a) change?
Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the annual ordering cost. 2. Compute the annual carrying cost. 3. Compute the cost of Ottiss current inventory policy. Is this the minimum cost? Why or why not?
A supermarket uses a supplier for its bottled water. The annual demand for this product is 24000 units. The supermarket purchases bottled water from its supplier at a price of $0.8 per bottle. The holding cost per of water per year is $0.4. The ordering cost for the supermarket is $80 per order and the lead time is 2 days. The company operates 250 days a year. The supermarket uses Economic Order Quantity model to manage its inventories. a).What is the inventory cycle time(time between orders)?
A supermarket uses a supplier for its bottled water. The annual demand for this product is 24000 units. The supermarket purchases bottled water from its supplier at a price of $0.8 per bottle. The holding cost per of water per year is $0.4. The ordering cost for the supermarket is $80 per order and the lead time is 2 days. The company operates 250 days a year. The supermarket uses Economic Order Quantity model to manage its inventories. What is the recorder point?
A microbrewery purchases malt for production. The supplier charges $35 for delivery (no matter how much is delivered) and $1.20 per gallon. The annual holding cost is 35% of the price per gallon. Usage is 250 gallons/week. a) If the order quantity is 1000 gallons, what is the average inventory? b) If the order quantity is 1500 gallons, how many orders are placed each year? c) What is the EOQ quantity? d) If the order quantity is 2500 gallons, what is the sum of the ordering and holding costs PER GALLON? e) If orders are for the EOQ amount, what is the annual cost of the inventory system as a percentage of the annual purchase cost? f)If orders must be in integer multiples of 1000 gallons, how much should be ordered to minimize ordering and holding costs PER GALLON? g) A 3% purchase price discount is given if orders are for 8000 gallons or more. What would total annual costs (purchasing, ordering, and holding) be using this discount?
Vallie Enterprise sells a product that cost $200 per unit and has a monthly demand of 500 units.The annual holding cost per unit is calculated as 2% of the unit purchase price. It costs the business $30 to place a single order. The maximum number of units sold for any one week is 150 and minimum sales 80 units. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. The EOQ model is appropriate. i) What is the cost minimizing solution for this product each year?ii)Determine the re-order level, minimum inventory level and maximum inventory level for the product.
A flower shop uses 230 clay pots a month. The pots are purchased for $2 each. Annual holding cost is estimated to be 25 percent of purchase cost, and ordering cost is $18 per order. The manager has been using an order quantity of 230 flower pots. a. Calculate the EOQ. (Round the final answer to the nearest whole number.) EOQ pots b. Calculate the EOQ's total annual inventory control cost. (Round the final answer to 2 decimal places.) TC $ c. What additional annual inventory control cost is the shop incurring by using the current order quantity? (Round the final answer to 2 decimal places.) Additional cost $
Vallie Enterprise sells a product that cost $200 per unit and has a monthly demand of 500 units. The annual holding cost per unit is calculated as 2% of the unit purchase price. It costs thebusiness $30 to place a single order.The maximum number of units sold for any one week is 150 and minimum sales 80 units. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. TheEOQ model is appropriate.i) What is the cost minimizing solution for this product each year?ii)Determine the re-order level, minimum inventory level and maximum inventory level for the product.
A Store has annual demand of 29,000 units. The annual carrying cost for a unit is $15.5, and the ordering cost is $400. The supplier routinely charges the store $17 per unit. However, the supplier has offered a discount price of $15.5 per unit if the store will order 8,800 units. A How much should the store order? B.What will be the total annual inventory cost for that order quantity? DA The store should order 8,800 units. OB. The store should order 7,800 units. OC The total annual inventory cost for that order quantity is $420,175.12 DD. The total annual inventory cost for that order quantity is $511,963.12 OE. The total annual inventory cost for that order quantity is $519,018.18 DF. The store should order 1,223.4 units.