QI AFG Company supplies an electronic amplifier to a company that incorporates these anmplifiers to AC units and other home appliances. The annual demand for these amplifiers is 4000 units, and this demand is constant throughout the year. The cost per unit is $10, and the inventory holding rate is estimated to be 5% of the unit cost per year. The ordering cost is $40 per order. a) To minimize cost, how many units should be ordered each time an order is placed? b) Estimate the total cost assuming the order quantity as in a? c) Suppose that the company was adopting a policy of ordering 1200 unit per order, what is the total cost under this policy and by how much it will be higher/lower than the total cost in b? d) For the ordering policy in c to be optimal, how much should be the ordering cost per order?
QI AFG Company supplies an electronic amplifier to a company that incorporates these anmplifiers to AC units and other home appliances. The annual demand for these amplifiers is 4000 units, and this demand is constant throughout the year. The cost per unit is $10, and the inventory holding rate is estimated to be 5% of the unit cost per year. The ordering cost is $40 per order. a) To minimize cost, how many units should be ordered each time an order is placed? b) Estimate the total cost assuming the order quantity as in a? c) Suppose that the company was adopting a policy of ordering 1200 unit per order, what is the total cost under this policy and by how much it will be higher/lower than the total cost in b? d) For the ordering policy in c to be optimal, how much should be the ordering cost per order?
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter16: Lean Supply Chain Management
Section: Chapter Questions
Problem 10DQ: The chapter presented various approaches for the control of inventory investment. Discuss three...
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