Alison's Accessories is a high volume worldwide fashion house with outlets in 65 countries. Sadly, space does
Question:
Alison's Accessories is a high volume worldwide fashion house with outlets in 65 countries. Sadly, space does not permit an exhaustive list but once the test is over, check out their website. Kalil, the supply chain manager is conducting her usual thorough analysis of her final four candidates for supplier and has developed the following tables of pertinent costs and other shipping metrics. Regardless of supplier, Alison's Accessories will operate 220 days per year and has forecast annual demand of 250,000 units. Kalil has obtained quotes for three different shipment sizes (Freight Costs table). All costs are in US Dollars.
Table 1
Unit costs
Supplier | Price/Unit | Carrying Cost |
A | 123 | 22 |
B | 125 | 19 |
C | 126 | 18 |
D | 100 | 40 |
Annual Freight Costs
Supplier | 15,000 units | 25,000 units | 50,000 units |
A | 380,000 | 260,000 | 237,000 |
B | 615,000 | 547,000 | 470,000 |
C | 285,000 | 240,000 | 200,000 |
D | 380,000 | 260,000 | 237,000 |
Other Costs
Supplier | Lead Time | Annual Admin Costs |
A | 30 | 250,000 |
B | 15 | 275,000 |
C | 7 | 225,000 |
D | 90 | 2,500,000 |
Use the date in Table 1. Analyze costs and make recommendations regarding the shipping options and suppliers. Which combination of shipping amount and supplier yields the lowest total cost?
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey