Wilson, Inc., is a wholesaler of Protoxid for industrial clients. Demand for Protoxid is stable at...
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Wilson, Inc., is a wholesaler of Protoxid for industrial clients. Demand for Protoxid is stable at 350,000 units per year. Wilson orders the product from its supplier four times a year. An order is placed when the total Protoxid on hand amounts to 25,000 units. This represents a nine-day working supply plus safety stock. The company works 300 days per year. Recently, Wilson management has expressed concern over the costs of carrying inventory and is seeking to evaluate the present inventory order and safety stock policies. As a part of the study, the following costs were identified with respect to Protoxid: Invoice price Weight per unit S 32.92 1.5 Kg S1.05 + $640 per truck + Shipping charges $0.40 per Kg Tax on cach unit S1.80 Special packaging per unit $3.65 (SI is refunded on return of the shipping container) S1.76 per unit, S415 per Insurance on shipment shipment Processing order documents Unloading operations per week. Inspect for annual inventory Estimated obsolescence costs S183 S0.82 per unit + $1,800 $2.63 per unit S1.35 per unit S0.92 per unit + Inventory record maintenance $2,200 per week Inventory tax Inventory insurance $4,100 per month. 3% of invoice price 15% of invoice price + The company estimates its cost of capital is 22%. In addition, it conducted a study on the costs of a stockout. The average stockout costs $5,400 due to the need to request special shipments from alternative suppliers. With various safety stock levels, the probabilities of a stockout decrease as follows: Probability of stockout Safety stock 1 50% 7,000 10% 14,000 21,000 1% To determine order quantity, assume a stockout probability per order of 2%. Order sizes are restricted to round lots of 5,000 units. The company has the capacity to store 90,000 units. REQUIRED a. What are the annual costs under the present order and safety stock system? b. What is the EOQ? c. What are the annual costs under the optimal order and safety stock system? d. What is the reorder point under the optimal order and safety stock system? Wilson, Inc., is a wholesaler of Protoxid for industrial clients. Demand for Protoxid is stable at 350,000 units per year. Wilson orders the product from its supplier four times a year. An order is placed when the total Protoxid on hand amounts to 25,000 units. This represents a nine-day working supply plus safety stock. The company works 300 days per year. Recently, Wilson management has expressed concern over the costs of carrying inventory and is seeking to evaluate the present inventory order and safety stock policies. As a part of the study, the following costs were identified with respect to Protoxid: Invoice price Weight per unit S 32.92 1.5 Kg S1.05 + $640 per truck + Shipping charges $0.40 per Kg Tax on cach unit S1.80 Special packaging per unit $3.65 (SI is refunded on return of the shipping container) S1.76 per unit, S415 per Insurance on shipment shipment Processing order documents Unloading operations per week. Inspect for annual inventory Estimated obsolescence costs S183 S0.82 per unit + $1,800 $2.63 per unit S1.35 per unit S0.92 per unit + Inventory record maintenance $2,200 per week Inventory tax Inventory insurance $4,100 per month. 3% of invoice price 15% of invoice price + The company estimates its cost of capital is 22%. In addition, it conducted a study on the costs of a stockout. The average stockout costs $5,400 due to the need to request special shipments from alternative suppliers. With various safety stock levels, the probabilities of a stockout decrease as follows: Probability of stockout Safety stock 1 50% 7,000 10% 14,000 21,000 1% To determine order quantity, assume a stockout probability per order of 2%. Order sizes are restricted to round lots of 5,000 units. The company has the capacity to store 90,000 units. REQUIRED a. What are the annual costs under the present order and safety stock system? b. What is the EOQ? c. What are the annual costs under the optimal order and safety stock system? d. What is the reorder point under the optimal order and safety stock system?
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a The annual cost under the present order and safety stock system is c... View the full answer
Related Book For
Core concepts of accounting information systems
ISBN: 978-1118742938
13th edition
Authors: Jacob M. Rose, Mark G. Simkin, Carolyn Strand Norman
Posted Date:
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