What is minimal annual inventory cost of current strategy

Assignment Help Financial Management

Reference no: EM13920197

Harley Davidson purchases components from three suppliers. Components purchased from Supplier A are priced at $ 5 each and used at the rate of 200000 units per year. Components purchased from Supplier B are priced at $ 4 each and are used at the rate of 50,000 units per year. Components purchased from Supplier C are priced at $ 5 each and used at the rate of 22,800 units per year. Currently Harley purchases a separate truckload from each supplier. As part of its JIT drive, Harley has decided to aggregate purchases from the three suppliers. The trucking company charges a fixed cost of $ 400 for the truck with an additional charge of $100 for each stop. Thus, if Harley asks for a pickup from only one supplier, the trucking company charges $ 500; from two suppliers it charges $ 600; and from three suppliers it charges $ 700. Harley incurs a holding cost of 20% (of the price) for each component. What is the minimal annual inventory cost of the Harley’s current strategy of ordering separately from each supplier? How much is the saving resulted?

Reference no: EM13920197

Questions Cloud

What is the profitability index for this project : Denali Inc. has the following cash flows and a 10% required rate of return: Year Cash Flow 0 - $4,400 (Year 1) 1,500 (Year 2) 2,400 (Year 3) 1,200 (Year 4) 2,600. What is the profitability index for this project?

Factory maintenance : Jasper Corporation incurred the following costs which includes salaries and wages in April: Salesperson's salaries $32,000 Factory maintenance $25,000 Factory insurance 10,000 Administrative utilities 4,000 Factory supervisor salary 30,000 Administra..

Identify systems being used in terms of purpose of system : Discuss how the different systems used in the first question are being handled - The purpose of the system and the problem it helped in solving?

What is the equivalent annual cost of machine : Deniro's, Inc. is analyzing two machines to determine which one they should purchase. The company requires a 14 percent rate of return and uses straight-line depreciation to zero book value with no salvage value. What is the equivalent annual cost of..

What is minimal annual inventory cost of current strategy : Harley Davidson purchases components from three suppliers. Components purchased from Supplier A are priced at $ 5 each and used at the rate of 200000 units per year. Components purchased from Supplier B are priced at $ 4 each and are used at the rate..

Assuming kerr earns a before interest expense recognition : Assuming Kerr earns a before interest expense recognition profit of $400 during 2013, determine the amount of interest and dividends paid.

Shares of its common stock : LMN issued 200 shares of its preferred stock, par $20, and 500 shares of its common stock, par $10 for a total cash consideration of $15,000. The current over-the-counter (OTC) stock prices for its stock were: Preferred, $25; Common, $20.

Challenge of crime in a free society : In the United States, the criminal justice policy is guided by "The Challenge of Crime in a free Society." The report has over two hundred of recommendations. The recommendations are about ways to combat and fight crime in the American society.

What is the geometric average return for four-year period : Over the last four years, the common stock of Plymouth Shippers has had an arithmetic average return of 9.3 percent. Three of those four years produced returns of 14.1 percent, 15.6 percent, and 3.4 percent, respectively. What is the geometric averag..

User Account

All Pages