IPL Limited uses a small casting in one of its finished products. The castings are purchased...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
IPL Limited uses a small casting in one of its finished products. The castings are purchased from a foundry. IPL Limited purchases 54,000 castings per year at a cost of ₹800 per casting. The castings are used evenly throughout the year in the production process on a 360-day-per-year basis. The company estimates that it costs 9,000 to place a single purchase order and about 300 to carry one casting in inventory for a year. The high carrying costs result from the need to keep the castings in carefully controlled temperature and humidity conditions, and from the high cost of insurance. Delivery from the foundry generally takes 6 days, but it can take as much as 10 days. The days of delivery time and percentage of their occurrence are shown in the following tabulation: 7 Delivery time (days) Percentage of occurrence 10 Required 1. 2. 3. 4. 5. : 6 75 8 5 9 5 10 5 Compute the economic order quantity (EOQ). Assume the company is willing to assume a 15% risk of being out of stock. What would be the safety stock? The re-order point? Assume the company is willing to assume a 5% risk of being out of stock. What would be the safety stock? The re-order point? Assume 5% stock-out risk. What would be the total cost of ordering and carrying inventory for one year? Refer to the original data. Assume that using process re-engineering the company reduces its cost of placing a purchase order to only 600. In addition, company estimates that when the waste and inefficiency caused by inventories are considered, the true cost of carrying a unit in stock is *720 per year. (a) Compute the new EOQ. (b) How frequently would the company be placing an order, as compared to the old purchasing policy? IPL Limited uses a small casting in one of its finished products. The castings are purchased from a foundry. IPL Limited purchases 54,000 castings per year at a cost of ₹800 per casting. The castings are used evenly throughout the year in the production process on a 360-day-per-year basis. The company estimates that it costs 9,000 to place a single purchase order and about 300 to carry one casting in inventory for a year. The high carrying costs result from the need to keep the castings in carefully controlled temperature and humidity conditions, and from the high cost of insurance. Delivery from the foundry generally takes 6 days, but it can take as much as 10 days. The days of delivery time and percentage of their occurrence are shown in the following tabulation: 7 Delivery time (days) Percentage of occurrence 10 Required 1. 2. 3. 4. 5. : 6 75 8 5 9 5 10 5 Compute the economic order quantity (EOQ). Assume the company is willing to assume a 15% risk of being out of stock. What would be the safety stock? The re-order point? Assume the company is willing to assume a 5% risk of being out of stock. What would be the safety stock? The re-order point? Assume 5% stock-out risk. What would be the total cost of ordering and carrying inventory for one year? Refer to the original data. Assume that using process re-engineering the company reduces its cost of placing a purchase order to only 600. In addition, company estimates that when the waste and inefficiency caused by inventories are considered, the true cost of carrying a unit in stock is *720 per year. (a) Compute the new EOQ. (b) How frequently would the company be placing an order, as compared to the old purchasing policy?
Expert Answer:
Answer rating: 100% (QA)
Sure lets go through each of the required calculations step by step 1 Compute the Economic Order Qua... View the full answer
Related Book For
Operations Management Sustainability and Supply Chain Management
ISBN: 978-0133764345
2nd Canadian edition
Authors: Jay Heizer, Barry Render, Paul Griffin
Posted Date:
Students also viewed these accounting questions
-
. A vertical pole that is 2 meters tall casts a shadow that is 1.5 meters long. Nearby, at the same time, another vertical pole casts a shadow that is 6.5 meters long. How tall is this pole? a. Make...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The following data on air pollution in 41 U. S. cities are from Biometry (Sokal and Rohlf, 1981). The type of air pollution under study is the annual mean concentration of sulfur dioxide. The values...
-
How do you identify the potential classes in a problem domain description?
-
Why is the termination clause in an outsourcing contract critical? What are some of the common causes for termination?
-
________ cycles occur roughly once every 24 hours. a. Biological b. Circadian c. Rotating d. Conscious
-
On1 January 2006, F Limited commenced business selling goods on hire purchase. Under the _ terms of the agreements, an initial deposit of 20 per cent is payable on delivery, followed by four equal...
-
The Bonita Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $60 a night. Operating costs are as follows. Salaries ...... $8,800 per month Utilities ..... 2,400...
-
. Current Attempt in Progress For each of the items in the following list, identify where it is included on a bank reconciliation: 1. EFT payment made by a customer. Bank debit memorandum for...
-
Summarizes current non-GAAP reporting practices in the industry; TOYOTA VS HONDA Include tables or other appropriate visualizations that reflect information about your companies, including...
-
MONEY FALLING FROM AN ARMORED TRUCK? That may sound pretty far-fetched, but it can and has happened. Take a recent six-month period. In August 2014, an armored truck left the Revel Casino Hotel in...
-
During 2021, Peoria Airlines paid salary expense of $40.8 million. At December 31, 2021, Peoria accrued salary expense of $2.3 million. Peoria then paid $2.6 million to its employees on January 3,...
-
The following T-account is a summary of the Cash account of Swifty Company. Cash (Summary Form) Balance, Jan. 1 Receipts from customers 8,200 362,100 Payments for goods 294,200 Dividends on stock...
-
A spherical, non-conducting shell of inner radius 1= 10 cm and outer radius 12= 15 cm carries a total charge Q = 15 C distributed uniformly throughout the volume of the shell. What is the magnitude...
-
57) Sharon Manufacturing is considering acquiring another facility for a cost of $610,000. The required payback period is 4.5 years. Assume annual net cash inflows are $150,000 for the first two...
-
A 2.00 kg pendulum bob on a string 1.50 m long, is released with a velocity of 2.00 m/s when the support string makes an angle of 30.0 degrees with the vertical. What is the speed of the bob at the...
-
Question 1 PART A (a) Distinguish between an ordinary annuity and an annuity due. (b)Shares in Jake Plc currently sell for Rs 2,500 and will be worth Rs 2,975 in 6 years. Calculate the rate of return...
-
Open Text Corporation provides a suite of business information software products. Exhibit 10-9 contains Note 10 from the companys 2013 annual report detailing long-term debt. Required: a. Open Text...
-
Tobacco is shipped from Tillsonburg, Ontario, to a cigarette manufacturer in Cambodia once a year. The reorder point, without safety stock, is 200 kilograms. The carrying cost is $15 per kilogram per...
-
Define strategy.
-
Sales of music stands at Johnny Hos music store in Burnaby over the past 10 weeks are shown in the table. a) Forecast demand for each week, including week 10, using exponential smoothing with a 5 0.5...
-
The following table includes five separate short-term note payable scenarios. Required For each separate scenario, complete the last column in the table by calculating interest expense accrued at the...
-
During 2020, Ward Company introduced a new product carrying a two-year warranty against defects, which is included in the selling price of the product. The estimated warranty costs are \(2 \%\) of...
-
On December 31, 2020, Millers Grocery Inc. had a 10 -year, \(7 \%\) note payable balance of \(\$ 100,000\). The note payable was originally issued on June 30, 2011. The company will issue its...
Study smarter with the SolutionInn App