A firm is faced with the attractive situation

Assignment Help Operation Management

Reference no: EM13817355

Problem 4.

A firm is faced with the attractive situation in which it can obtain immediate delivery of an item it stocks for retail sale. The firm has therefore not bothered to order the item in any systematic way. However, recently profits have been squeezed due to increasing competitive pressures, and the firm has retained a management consultant to study its inventory management. The consultant has determined that the various costs associated with making an order for the item stocked are approximately $70 per order. She has also determined that the costs of carrying the item in inventory amount to approximately $27 per unit per year (primarily direct storage costs and forgone profit on investment in inventory). Demand for the item is reasonably constant over time, and the forecast is for 16,500 units per year. When an order is placed for the item, the entire order is immediately delivered to the firm by the supplier. The firm operates 6 days a week plus a few Sundays, or approximately 320 days per year. Determine the following:

a. Optimal order quantity per order

b. Total annual inventory costs

c. Optimal number of orders to place per year

d. Number of operating days between orders, based on the optimal ordering.

Reference no: EM13817355

Questions Cloud

Obviously a department use of force policy : Obviously a department's use of force policy must establish guidelines officers can apply to any given situation to determine the amount of force that would be appropriate. The policy should not be vague, being clear enough to ensure an officer can e..

Construct a network from the information : Construct a network from the information in the following table and identify all the paths in the network, compute the length of each, and indicate the critical path. Determine the earliest start and finish times, latest start and finish times, and s..

New equity value of tyler : What is the new equity value of Tyler on its balance sheet? How much goodwill will Talmadge enter on its balance sheet as a result of this merger?

Examine accounting principles : Examine accounting principles and concepts used in businesses. Assess appropriate internal controls, regulatory requirements according to the Sarbanes-Oxley Act, and fraud prevention and detection.

A firm is faced with the attractive situation : A firm is faced with the attractive situation in which it can obtain immediate delivery of an item it stocks for retail sale. The firm has therefore not bothered to order the item in any systematic way. However, recently profits have been squeezed du..

Family tree and population analysis : Family Tree and Population Analysis

Statements conform to financial accounting standards board : Analyze the selected not-for-profit's financial statements to determine if the statements conform to Financial Accounting Standards Board (FASB) guidance in Statement No. 117, Financial Statements of Not-for-Profit Organizations (FASB ASC 958-205-..

Compute kimm total standard cost per unit : Manufacturing overhead. Overhead is applied at a rate of $5.10 per direct labor hour. Compute Kimm's total standard cost per unit.

Burger doodle is a fast-food restaurant : Burger Doodle is a fast-food restaurant that processes an average of 680 food orders each day. The average cost of each order is $6.15. Four percent of the orders are incorrect, and only 10% of the defective orders can be corrected with additional fo..

User Account

All Pages