Determine carrying cost, Business Management

Assignment Help:

Example: You  are given  the followings  information in regard to an item:

Annual usage     = 20,00 units.

Ordering cost     = Rs. 160 per order

 Carrying cost    = 20 % of the average inventory investment

 Unit  cost          =  Rs. 2

 Lead time         = 10 working  days

Total working  days = 250  per annum

It is  observed from  the past date that the demand during lead time has been up to  a maximum  level  of  150 unit  per day. Keeping this level  in mind what safety stock would  you recommend ? also  determine : 

a. The re order  level when the safety stock level suggested by you is kept in stock.

b. Average level of inventory stock help

c. The ordering and carrying costs associated with this fixed order inventory  policy .

Solution;

 We   know  safety stock     SS  =  max  DDLT - average DDLT

 With maximum demand per day = 150 units,

 Average demand per day = 20,000/250= 80 units

Lead time = 10 days

 We have  Maximum DDLT =  150x 10 = 1000units and

 Average DDLT = 80x 10 = 800 units

                                                 SS = 1500- 800= 700 units

1.       Re order  level           =SS  + average DDLT = 700+ 800= 1500 units

2.       Average stock level = SS +Q* / 2

 

        Q * =  2x 160x 20, 000/x0.20x2x = 4, 000 units

 From the  given  information            

 Thus average stock level    = 700 + 4000/ 2 = 27 00 units

3.  Ordering cost    = 20, 000/ 4000 X 160 = Rs. 800

4.  Carrying cost    = 2700x 0.40= Rs. 10 80

5.  Total cost  = 800+1080+ =Rs 18880


Related Discussions:- Determine carrying cost

Analyse the functions of leaders in relation to task needs, QUESTION 1 ...

QUESTION 1 "The process of Communication involves the exchange of ideas, feelings and values to build up mutual understanding and good human relations." Give an account of the

How managers deal with elements of the specific environment, QUESTION 1 ...

QUESTION 1 How has Henry Mintzberg and others contributed to identify the roles and skills of a manager? QUESTION 2 (a) Outline the major elements that make up the gene

Explain about the top management functions in brief, Explain about the top ...

Explain about the top management functions in brief. Top Management: This includes Board of Directors, Chief Executive, Managing Directors, Owners and Share holders as we

What are the scopes of management information system, What are the scopes o...

What are the scopes of Management Information System? Scope of Management Information System is: a. For giving timely, accurate, relevant and whole information. b. For gi

What is authoritarian in leadership, What is authoritarian in leadership? ...

What is authoritarian in leadership? Authoritarian: • Leader creates all decisions, demands and conveys implementation. • All policies are found by him unilaterally wi

Definition of entrepreneur by harbison and peter f. drucker, Describe the d...

Describe the definition of entrepreneur according to Harbison and Peter F. Drucker. According to Harbison : "An entrepreneur, it is not an innovation but a business builder

International business, VK Ltd a multi product company, furnishes you the f...

VK Ltd a multi product company, furnishes you the following data relating to the year 2000. First half sales Second half sales Sales Rs.45000 Rs.50000 Total cost Rs.40000 Rs.4

Responsibilities of an organisation and strategies, a) Justify the purposes...

a) Justify the purposes of dissimalr types of organisation b) Explain the extent to which an organisation meets the objectives of disimilar stakeholders c) Describe the respo

Differentiate between a work group and a work team, Problem: (a) Diff...

Problem: (a) Differentiate between a work group and a work team. (b) Explain clearly the different types of team in organisation. (c) Referring to your organization o

Identify the best organizational structure, Identify the best organizationa...

Identify the best organizational structure: Q. Southern Industrials Ltd. wants to develop a competency-based approach to executive selection. Which leadership perspective main

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd