Question

In: Accounting

Company B is a retailer of mobile phones in Australia that works 250 days in a...

Company B is a retailer of mobile phones in Australia that works 250 days in a year. The
manager is determining a minimum-cost inventory plan for an upcoming phone to be
launched in the market. She has collected the following information:


• Annual demand: 900 phones
• Phone cost: $1,079 each
• Phone RRP: $1,199 each
• Net weight: 163 g each
• Tare weight: 277 g each
• Annual inventory holding cost: 15%
• Cost per order to replenish inventory: $75
• Annual in-transit holding cost: 10%
• Freight rate: $7.50 per kg
• Time to process order for freight: 1 days
• Freight transit time: 3 days


Solve this problem using a non-linear programming (NLP) model to determine the followings:


a. Economic order quantity for the phone in units and in kg
b. The total cost for purchasing the phones
c. The total cost for ordering
d. The total cost for holding the inventory
e. The total cost for transportation
f. The total cost for holding the phones during transit
g. The total cost for this inventory plan
h. The number of orders
i. Ordering point
j. The profit from this inventory plan

Please explain word and excel calculation

Solutions

Expert Solution

Answer:

Given that

Annual demand: 900 phones
Phone cost: $1079 each
Phone RRP: $1199 each
Net weight: 163 g each
Tare weight: 277 g each
Annual inventory holding cost: 15%
Cost per order to replenish inventory: $75
Annual in-transit holding cost: 10%
Freight rate: $7.50 per kg
Time to process the order for freight: 1 days
Freight transit time: 3 days

A. The economic order quantity for the phone in units and in kg

=process time*demand*cost/inventory cost

=1*900*75/7.50

=$ 9000

B. The total cost for purchasing the phones

=demand*phone cost*net weight

=900*1079*163

TOTAL COST OF PURCHASING THE PHONE=$158,289,300

TOTAL COST WITH TARE=demand*phone cost*tare weight

=900*1079*277

TOTAL COST WITH TARE=$ 268,994,700

C. The total cost for ordering

TOTAL COST FOR ORDERING-PER ORDER COST IS $75

D. The total cost for holding the inventory

THE TOTAL COST FOR HOLDING INVENTORY-

ANNUAL INVENTORY HOLDING COST IS $15%OF =268,994,7008*0.15

=$403,492,051.2‬

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Thanking You...

ekkarill92 answered 2 years ago
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