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

Implementation of e-procurement in an organization, Question 1: (a) Tho...

Question 1: (a) Though e-procurement overcomes many of the shortcomings of traditional purchasing systems yet it did not have the success expected. Discuss why this has been th

Explain the various characteristics of mis, Question 1 Earlier payr...

Question 1 Earlier payroll systems used the systems which were more than process time sheets, print payroll checks and keep total so f annual wages and deductions. Present

Discuss the qualities and attributes of an ethical leader, Question : C...

Question : Contemporary corporate governance requires ethical leadership. (a) Show the qualities and attributes of an ethical leader. (b) It is now advocated that corpora

You are contracted to provide an assessment and reco, how much will be the ...

how much will be the cost for 3000 words deadline in 9th june

Explain the basic principles of governing internal control, Question 1 ...

Question 1 Discuss, in brief, the advantages and limitations of auditing Question 2 Explain the key objectives of a good internal audit system. Write down the essential

What is the meaning of term entrepreneurship, What is the meaning of term E...

What is the meaning of term Entrepreneurship? Meaning of Entrepreneurship: Entrepreneurship refers to a process of action an entrepreneur undertakes to establish h

Quantitative analysis for managerial decision making, what is the role and ...

what is the role and significance of quantitative techniques in modern management?

What are programme evaluation and review technique, What are Programme Eval...

What are Programme Evaluation and Review Technique? PERT (Programme Evaluation and Review Technique): It is a technique used for controlling and scheduling the projects w

What are the characteristics of a good title, QUESTION 1 Answer briefly...

QUESTION 1 Answer briefly to any three of the following (a) Why is it important to give your reports an effective visual presentation? (b) What determination(s) do visual

Comprehensive agenda for the participants of the meeting, Imagine that you ...

Imagine that you are the Chairperson of the Board of Studies of the Department of Management & Commerce of Sikkim Manipal University Department of Distance Education.  You have bee

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