Question: Just need help on part D An Inventory Management Decision Model l or a manufacturing company that you are consulting for, managers are unsure about

 Just need help on part D An Inventory Management Decision Model
Just need help on part D

An Inventory Management Decision Model l or a manufacturing company that you are consulting for, managers are unsure about making iventory decisions associated with a key engine component. The annual demand of the omponent is estimated to be 15,000 units and is assumed to be constant throughout the year. Each init costs $80 (This is the Unit Cost). The company's accounting department estimates that the ost of holding this item in stock for one year is 18% of the unit value. Each order placed with the upplier costs \$220 (This is the Ordering Cost Per Order). The company's policy is to place a ixed order of Q units (this is the Order Quantity) whenever the inventory level reaches a predetermined reorder point that provides sufficient stock to meet demand until the next order can be shipped and received. As a consultant, your task is to build a comprehensive decision model, using the equations at the bottom of this case, in spreadsheet that will answer the following questions a) Compute Total Annual Cost with Q=500 units. [Points 5] b) Build a spreadsheet to show how Total Annual Cost changes as Order Quantity Changes. [Hint: Use What-If Analysis / Data Table to compute Total Annual Cost at different levels of Order Quantity. For Order Quantity, start with 100 , increase by 50 , and end with 1500 . This is called one-way data table as you are changing one variable, Order Quantity, at a time.] Interpret your results. [Points 5] c) Redo part (a) in a new worksheet and then use Solver [Hint: Data / Solver] to determine the Optimal Order Quantity (i.e., find the value of Q that minimizes Total Annual Cost). Interpret your results and make your recommendation to the management about the Optimal Order Quantity [Reviewing past problems that involved use of solver will help.]. [Points 5] d) Redo part (a) in a new worksheet and conduct a Sensitivity Analysis to show how Total Annual Cost changes as both Unit Cost and Ordering Cost Per Order change simultaneously. For order quantity (Q), use the Optimal Order Quantity you computed in part (c). [Hint: Use What-If Analysis / Data Table to compute Total Annual Cost at different levels of Unit Cost and Ordering Cost Per Order. For Unit Cost, start with 50, increase by10, and end with 120. For Ordering Cost Per Order, start with 150, increase by 10 , and end with 300 . This is called a two-way data table as you are changing two variables at a time. [Reviewing problem Two Way Data Table and Solver 01 on Canvas will help.] Interpret your results. [Points 5] Please note the following definitions for your analysis: Total Annual Cost = Annual Ordering Cost + Annual Holding Cost Annual Ordering Cost =( Ordering Cost Per Order )(OrderQuantityAnnualDemand)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!