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

Explain any five qualities of an outsourcing project leader, Briefly explai...

Briefly explain any five qualities of an outsourcing project leader. 1. Ability to embrace and support change. 2. Earned credibility across the organization. 3. A desire

Sale management, state the reasons why you choose marketing as a profession...

state the reasons why you choose marketing as a profession

How managers manage their specific environment, Question 1: All organiz...

Question 1: All organizations are being impacted by changes in both the internal and external business environment. In order to reduce the negative impact of these changes on t

Show the sales for a product, a) Copy the sales data provided on the VLE in...

a) Copy the sales data provided on the VLE into a separate worksheet within your Garden workbook and call it Sales Database. Sort this data into sales for each month in 2010 and s

Explain potential conflict between management and company, CRSL has a large...

CRSL has a large auditorium which can cater for 300 people and is ideal for formal balls and functions. The auditorium can also be reconfigured to cater for 100 people. The Seasons

Show the steps involved in the stakeholder circle model, Question: The ...

Question: The central role of stakeholders in the successful delivery of projects is becoming increasingly recognized. Engaging effectively and ethically with key stakeholders

Explain the steps of the communication process, QUESTION 1 (a) By using...

QUESTION 1 (a) By using a diagram, fully explain the steps of the communication process. (b) Elaborate on five barriers that affect communication arising from individuals ha

What are the factors affected to motivation, What are the factors affected ...

What are the factors affected to motivation? Factors affecting motivation are as follows: a. Achievement: Personal satisfaction within job completion and solving problem

Business intelligence, Business Intelligence (BI) is aimed at supporting or...

Business Intelligence (BI) is aimed at supporting organisational decision makers who are often said to be operating under the assumptions of ‘Procedural rationality'. Explain what

What do you mean by performance appraisal, What do you mean by Performance ...

What do you mean by Performance Appraisal? Performance Appraisal: This appraisal is an impartial and systematic assessment of an employee’s performance onto the job, alon

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