M/s Futurama handles a variety of imported auto components. One of the key components is suspension systems.

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Question:

M/s Futurama handles a variety of imported auto components. One of the key components is suspension systems. Considering the criticality of this part, the company has built a separate storage facility that has an annual fixed cost of US$, 5000. Since the components are imported, the company is incurring following ordering costs

Delivery cost per order = US$2000

Import Duty per Order = US$300

Custom Fees per Order = US$200

Import License per annum = US$200

There is a total demand of 12000 pieces per annum (monthly demand of 1000 pieces with a standard deviation of 100 pieces). The supply lead time is 1 month with a standard deviation of 0.3 months. The company is conveniently placing one order every month with an average qty of 1000. The cost per piece is US$30. The annual holding cost rate is 30%. Calculate cycle stock and safety stock point if the firm is willing to tolerate a 1% chance (Z0.99 = 2.32) of a stock out during an order cycle. Also, calculate the total cost of inventory. (20 Marks)

The above question carries 20 marks. And as per the guidelines of the university, the answer should be a min of 800 Words. Please prepare a min of 800 words answer