Charlie spend on the material cost of flour bags

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Reference no: EM132282589

Cycle Inventory. You are helping Charlie to set up a new store. In this new store, Charlie needs 750 bags of flours every month. A month consists of 30 days. Charlie has to pay $4 per bag of flour to her supplier. She also has to pay a fixed ordering and delivery charge of $5 per order. Charlie’s annual cost of inventory holding is 36% of her material cost.

(a) What is Charlie’s inventory holding cost H in $ per bag per month?

(b) Suppose you tell Charlie to order 150 bags every time. If she does that, how many times will Charlie order every month? What will be her total ordering cost in a month? Do not round up or down any fractional values.

(c) After how many days will Charlie need to order again? (Hint: This is the Order Cycle Time) Do not round up or down any fractional values.

(d) By ordering 150 bags every time, what will be Charlie’s average inventory? How much will Charlie spend in inventory holding cost every month?

(e) How much will Charlie spend on the material cost of flour bags every month?

(f) What will be Charlie’s Total Relevant Cost per month, by ordering 150 bags in each lot?

(g) What will be Charlie’s Total Cost per month, by ordering 150 bags in each lot?

Reference no: EM132282589

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