What is the sum of annual pipeline and cycle inventory

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Reference no: EM133651175

Assignment:

You manage the shipping of item #LV487 from your supplier. The shipments for this item are delivered to the nearest port, and you have to transport them to the distribution center. You have two options, full truck load (FTL) and less than truck load (LTL).

Your company needs 5000 units of #LV487 per year and it is purchased at a price of $38 per unit. Each order costs $92. Your company uses an annual holding charge of 12.0%, a cycle service level of 90% and 365 days per year for planning purposes.

The full truck load (FTL) option costs $1500 per load. It takes 4 days to deliver and each truck can carry up to 1400 items.

The less than truck (LTL) load option costs $2.6 per item. It takes 6 days to deliver.

You have three options,

OPTION A: to use the FTL option and deliver full truck loads,

OPTION B: to use the FTL option and deliver the economic order quantity

OPTION C: to use LTL option and deliver the economic order quantity.

Your company includes the cost of transportation as an item cost unless otherwise specified. This decision impacts all costs such as purchase, ordering and inventory costs. As an example, the cost per item of #LV487 in the Full truckload is $1500/1400items + $38/item = $39.07/item.

Please answer (Option A) Full Truck Load (FTL)

What is the sum of annual pipeline and cycle inventory, ordering, and purchase costs for option A? Please provide your answers rounded to the closest dollar.

Remember to include the transportation costs as an item cost.

Please answer (Option B) FTL with EOQ

What is the economic order quantity? Exceptionally, use the item cost without the transportation cost for the EOQ calculation. Please answer in whole numbers.

Please anser If you order the EOQ calculated earlier (rounded to a whole number), what is the sum of annual pipeline, cycle inventory, ordering, and purchase costs for option B? Consider transportation costs a part of the item cost. Please provide your answers rounded to the closest dollar.

Please answer (Option C) Less than Truck Load (LTL)

What is the sum of annual pipeline and cycle inventory, ordering, and purchase costs for option C? Consider transportation costs as an item cost, and use the EOQ calculated in the previous section in whole numbers for the calculation. Please provide your answers rounded to the closest dollar.

Reference no: EM133651175

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