What is the annual inventory cost of the current system

Assignment Help Cost Accounting

Reference no: EM131005835

All solutions should be done with excel, the cells have to be clear and labeled, the formulas have to be clear, the final solution should be highlighted.

1. Motorola obtains cell phones from its contract manufacturer located in China to serve the U.S. market. The U.S. market is served from a warehouse located in Memphis, Tennessee. Daily demand at the Memphis warehouse is normally distributed, wits a mean of 5,000 and a standard deviation of 4,000. The warehouse aims for a CSL of 99 percent. The company is debating whether to use sea or air transportation from China. Sea transportation results in a lead time of 36 days and costs $0.50 per phone. transportation results in a lead time of 4 days and costs $1.50 per phone. Each phone costs $100, and motorola uses a holding cost of 20 percent. Given the minimum lot sizes, Motor would order 100,000 phones at a (on average, once every 20 days) if using sea transport, and 5000 phones at a time (on average, daily) if using air transport. To begin with assume that Motorola takes ownership of the inventory on delivery.

a. Assuming that Motorola follows a continuous review policy, what reorder point and safety inventory should the warehouse aim for when using sea or air transportation? How many days of safety and cycle inventory will Motorola carry under each policy?

b. How many days of cycle inventory does Motorola carry under each policy?

c. Under a continuous review policy, do you recommend sea or air transportation if Motorola does not own the inventory while it is in transit? Does your answer change if Motorola has ownership of the inventory while it is in transit?

2. Return to the problem data in problem 1. Assume that Motorola follows a periodic review policy. Given lot sizes by sea and air, Motorola would have to place an order every 20 days using sea transport but could order daily using air transport.

a. Assume that Motorola follows a periodic review policy. What order-up-to level and safety inventory should the warehouse aim for when using sea or air transportation? How many days of safety inventory will Motorola carry under each policy?

b. How many days of cycle inventory does Motorola carry under each policy?

c. Under a periodic review policy, do you recommend sea or air transportation? Does your answer change if Motorola has ownership of the inventory while it is in transit?

3. DoorRed Pharmacy replenishes one of its best-selling drugs using a continuous review policy. Daily demand for the drug is normally distributed, with a mean of 300 and a standard deviation of 100. The wholesaler can process a replenishment request in two days. The current replenishment policy is to order 1,500 units when there are 750 units on hand.

a. What is the cycle service level that DoorRed achieves with its policy?

b. What is the fill rate that DoorRed achieves with its policy? What change in fill rate would DoorRed achieve if it 'ncreased its reorder point from 750 to 800?

4. Return to the DoorRed Pharmacy in problem 2. For the drug under discussion, DoorRed wants to adjust its reorder point from 750 to achieve a fill rate of 99.9 percent. What reorder point should it use?

Case Study- Alko Case

Managing Inventories at ALKO Inc.

QUESTIONS

1. What is the annual inventory an istribution cost of the current distribution system?

2. What are the savings that would, tilt from following the task force recommendation and setting up an NDC?

Evaluate the savings a correlation coefficient of demand in any pair of regions varies from 0 to 0.5 to 1.0.

Do you recommend setting up an NDC?

3. Suggest other options that Fisher should consider.

Evaluate each option and recommend a distribution system for ALKO that would be most profitable. How dependent is your recommendation on the correlation coefficient of demand across different regions?

Case Study - Penang electronics case

Should Packing be Postponed to the DC?

1. What is the annual inventory cost of the current system in which product is produced, labeled, and packed in Malaysia before being shipped to the DC?

2. How would the inventory cost change if labeling and pack-aging were moved to the DC? Evaluate the change in inventory costs as the correlation coefficient of demand between any pair of customers varies from 0 to 0.5 to 1.0.

3. How should PE set up its production. labeling, and pack-aging processes? Does your answer change if the additional cost of labeling and packaging at the DC is reduced to SI (from the current value of $2)?

Managing Uncertainty in Supply Chain- Safety Inventory

Reference no: EM131005835

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