Amount of starting inventory

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Reference no: EM131805012

A production company A, made JITD strategic alliance with a distribution company B. The content of alliance is,

Company A executes work for company B's inventory management and all the inventory cost caused from B is responsible on A.

The decision for inventory replenishment is made on every Saturday,

Order amount is arrived every Sunday night after the delivery process from A to B.

The amount of starting inventory is 50 at Week 0

Inventory holding cost: 1,000 won/week per unit

When the shortage incurred, it is taken care of as Backorder, not as lost-sale. Backorder cost : 2,000 won/week per unit.

Inventory replenishment happens when the inventory level is less than 19, and the amount of inventory to be refilled is calculated as "50-current inventory level".

Transportation cost: 50,000 won per every delivery

If the total number of demand met - the total number of Backorder is more than 131, the incentive, 20,000 won per unit is given to A.

Following table shows weekly demand of 'B' company for last 8 weeks. Please answer based on the information given above. All the cost is calculated from week 1.

Week	0	1	2	3	4	5	6	7	8	Total
Weekly demand		15	20	10	15	30	20	5	35	150
Demand met
Inventory level at the end of Week	50
Holding cost
Shortage cost
Amount of Inventory to be replenished
Transportation cost

(1) How much inventory does company A replenish for the first time?

(2) How many times does company A replenish inventory for 8 weeks?

(3) How many times does company B experience inventory shortage for 8 weeks?

(4) How many demands of company B were met for 8 weeks among 150?

(5) How much does company A have to pay for total shortage cost for 8 weeks?

(6) Company A would experience (More profit or Loss of profit), and the amount would be _______________ won. [Note: Total expense company A = holding cost+ shortage cost+ transportation cost. If the total expense is lower than the total incentive company A would receive, we consider "More profit". Otherwise we consider it as "Loss of profit"]

Reference no: EM131805012

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