Question

Discussion Question_Inventory Control Part a The Deli University Gift Shop purchases sweatshirts emblazoned with the school name and logo from a vendor in Spain Town at a cost of $2,000 each. The annual holding cost for a sweatshirt is calculated as 1.5% of the purchase cost. It costs the Gift Shop $500 to place a single order. The Gift Shop manager estimates that goo sweatshirts will be sold during each month of the upcoming academic year. i) Determine the highest number of shirts that should be purchased by the Gift Shop in order to minimize stock administration costs. ii) What is the number of orders to be placed each year? iii) Compute the average annual ordering cost iv) Compute the average annual carrying cost v) Compute the total stock administration cost Part b The maximum sale for the Gift Shop for any one week is 300 sweatshirts and minimum sales 150 sweatshirts. The vendor takes anywhere from 2 to 4 weeks to deliver the merchandise after the order is placed. Using the EOQ policy, determine the re-order level, minimum inventory level and maximum inventory level for the business.

Answer 1

palt-Ai The purchase cost of sweat shirts = $2000 Annual holding cost for Sweatshirt = 1.5% of purchase cost = 1,5% *2000 $30 Ordering cost for single order - $ 500 Monthly estimated Sales - 900 Annual sales will be = 900×12= 10,800 Highest no. of Shirts that should be purchased EOC EOA - 2*3*0, 2x 10800X500 Goo shirts 30 600 NO of order to be placed - Total sales - 10,800 - 18 orders EO Average annual ordeling coste No.of ordeus xordering cost 18* 500 $9,000 > Average annual carrying cost. Aug stock carrying cost - COD 30 = $9000 Total Stock adminiSkation Cost: Aug orolieting + Ang carrying - $9000 +$9000 = $ 18,000

Monimum Sales Minimum Salus Lead time is - 300 - 150 Avg consumpon 2 to 4 weeks 300 tiso = 450 -205 2 Ava time 2t4 - 3 weeks Re Oodel level: maximum consumption x maximum resolve period = 300 x4 - 1200 inventory level. Reordering level - Normal Consumption x 7 Normal period Minimum " 1200 - (225*3] - 1200-675 - 525 inventory level Reordee level + Reordel 94 Minimum Consumption Minimumt re orde pericol 1200 + 600-(150*2] = 1200 + 200-300 =960 1500