Question

sight Zendesk GAN & Slack Geo Comply/NJ Employee Home > Trimet NJOnline Casino > MCP - My Card PL Saved mapter One Exercise 1-15A (Algo) Using JIT to minimize holding costs LO 1-5 Munoz Pet Supplies purchases its inventory from a variety of suppliers, some of which require a six-week lead time before delivering the goods. To ensure that she has a sufficient supply of goods on hand, Ms. Leblanc, the owner, must maintain a large supply of inventory. The cost of this inventory averages $20,200. She usually finances the purchase of inventory and pays a 10 percent annual finance charge. Ms. Leblanc's accountant has suggested that she establish a relationship with a single large distributor who can satisfy all of her orders within a two-week time period. Given this quick turnaround time, she will be able to reduce her average inventory balance to $3,900. Ms. Leblanc also believes that she could save $2,200 per year by reducing phone bills, Insurance, and warehouse rental space costs associated with ordering and maintaining the larger level of inventory Required b. Based on the information provided, how much of Ms. Leblane's inventory holding cost could be eliminated by taking the accountant's advice? Eliminated inventory holding cost < Prev 5 of 5 Nexd

Answer 1

Answer: Eliminate average inventory cost: $3,830

Saving by reducing phone bills, insurance and saving in rental space cost = 2,200

saving in the cost of interest = 20,200-3,900= $16,300

= 16,300* 10%

= 1,630

Total savings= $1,630+$2,200

=$3,830

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