For a manufacturing company that you are consulting for, managers are unsure about making inventory decisions associated with a key engine component. The annual demand is estimated to be 15,000 units and is assumed to be constant throughout the year. Each unit costs $80. The company’s accounting department estimates that its opportunity cost for holding this item in stock for one year is 18% of the unit value. Each order placed with the supplier costs $220. The company’s policy is to place a fixed order for Q units whenever the inventory level reaches a predetermined reorder point that provides sufficient stock to meet demand until the supplier’s order can be shipped and received.
As a consultant, your task is to develop and implement a decision model to help them arrive at the best decision. As a guide, consider the following:
1. Define the data, uncontrollable inputs, and decision variables that influence total inventory cost.
2. Develop mathematical functions that compute the annual ordering cost and annual holding cost based on average inventory held throughout the year in order to arrive at a model for total cost.
3. Implement your model on a spreadsheet.
4. Use data tables to find an approximate order quantity that results in the smallest total cost.
5. Use Solver to verify your result.
6. Conduct what-if analyses to study the sensitivity of total cost to changes in the model parameters.
7. Explain your results and analysis in a memo to the vice president of operations.
Answers: 3
Business, 21.06.2019 13:00, Headahh9986
Fern corporation manufacturers a single product that has a selling price of $20.00 per unit. fixed expenses total $48,000 per year, and the company must sell 6,000 units to break even. if the company has a target profit of $14,000, sales in units must be:
Answers: 1
Business, 22.06.2019 15:20, iselloutt4fun
Kelso electric is debating between a leveraged and an unleveraged capital structure. the all equity capital structure would consist of 40,000 shares of stock. the debt and equity option would consist of 25,000 shares of stock plus $280,000 of debt with an interest rate of 7 percent. what is the break-even level of earnings before interest and taxes between these two options?
Answers: 2
For a manufacturing company that you are consulting for, managers are unsure about making inventory...
Physics, 15.11.2020 19:50
Social Studies, 15.11.2020 19:50
Business, 15.11.2020 19:50
Social Studies, 15.11.2020 19:50
Chemistry, 15.11.2020 19:50
Mathematics, 15.11.2020 19:50