Question

In: Operations Management

For an inventory model - no backorder is allowed: D=16,428 ordering cost/order=517 Interest rate=0.27 Purchase price...

For an inventory model - no backorder is allowed:

D=16,428

ordering cost/order=517

Interest rate=0.27

Purchase price per item = 20

Calculate the unit costs?

Solutions

Expert Solution

Answer: As no specific information is mentioned in the question, we will find the unit cost by dividing the total inventory cost by the annual demand, assuming the total inventory cost includes, the annual inventory holding cost, annual inventory ordering cost, and the annual purchasing cost.

Step 1: Find Economic Order Quantity (EOQ)

Let D = Annual Demand = 16428 Units

O = Ordering Cost Per Order = 517 $

H = Holding Cost Per Unit Per Annum = 0.27 X 20 = 5.4 $

P = Purchase Price Per Unit = 20 $

Q = EOQ = SQRT [( 2 X D X O) / H]

= SQRT [ ( 2 X 16428 X 517) / 5.4]

= SQRT ( 3145657.78)

= 1773.60 Units (Rounded to 2 decimal places)

Step 2: Find the total inventory cost =

Total Inventory Cost = ( Q / 2) H + (D / Q) O + P X D

= [(1773.60 / 2 ) 5.4 ]+ [(16428 / 1773.60) 517] + [20 X 16428]

= 4788.72 + 4788.72 + 328560

= 338137.44 $

Step 3: Find Unit Cost

Unit Cost = Total Inventory Cost / D = 338137.44 / 16428 = 20.5830 $ (Rounded to 4 Decimal Places)

keosha answered 1 year ago
Next > < Previous

Related Solutions

For an EOQ ordering quantity of 750 units, an ordering cost of $5 per order, a...
For an EOQ ordering quantity of 750 units, an ordering cost of $5 per order, a holding cost of $10 per unit per year, and an annual demand of 900 units, what is the annual total cost for this value of Q?
An annual demand for an item is 500 units, ordering cost is 8 $, inventory carrying...
An annual demand for an item is 500 units, ordering cost is 8 $, inventory carrying interest is 20% of the purchase price per year. Purchase prices are as follows as proposed by the vendor/supplier; where the value of unit cost=10 without any discount? Discount 0% 000≤Q<300    Discount 2% 300≤Q<450 Discount 3% 450≤Q
An annual demand for an item is 500 units, ordering cost is 8 $, inventory carrying...
An annual demand for an item is 500 units, ordering cost is 8 $, inventory carrying interest is 20% of the purchase price per year. Purchase prices are as follows as proposed by the vendor/supplier; where the value of unit cost=10 without any discount? Discount 0% 000≤Q<300    Discount 2% 300≤Q<450 Discount 3% 450≤Q a) for inventory model with no discount====================================================================== a1) The economic order quantity = [EOQ] units a2) The total ordering costs = [TOC] $ a3) The total...
1- Inventory costs include all of these: purchase costs, holding or carrying costs, and ordering costs....
1- Inventory costs include all of these: purchase costs, holding or carrying costs, and ordering costs. T. True F. False 2- The Economic Order Quantity (EOQ) model tells us........ A. how much to order B. which are higher - holding or ordering costs C. how to use price discounts D. when to order 3- When tracking or counting inventory items, we should focus on which items most? A. A-items B. B-items C. C-items D. D-tems 4- The Economic Order Quantity...
1- Inventory costs include all of these: purchase costs, holding or carrying costs, and ordering costs....
1- Inventory costs include all of these: purchase costs, holding or carrying costs, and ordering costs. T. True F. False 2- The Economic Order Quantity (EOQ) model tells us........ A. how much to order B. which are higher - holding or ordering costs C. how to use price discounts D. when to order 3- When tracking or counting inventory items, we should focus on which items most? A. A-items B. B-items C. C-items D. D-tems 4- The Economic Order Quantity...
In a basic EOQ model, if the fixed ordering cost F increases, then the optimal time...
In a basic EOQ model, if the fixed ordering cost F increases, then the optimal time between orders, T, will increase. A) True B) False
Special Purpose EOQ Model: Price-break model Problem information: Annual Forecast: 12,000 units Order processing cost: $125/order...
Special Purpose EOQ Model: Price-break model Problem information: Annual Forecast: 12,000 units Order processing cost: $125/order Inventory Carrying rate: 20% per year Unit Price Price levels 1 to 999 units/order $510 1000 to 2999 units/order $500 3000+ units/order $490 1. Calculate EOQ at each price-break 2. Determine Q at each price-break 3. Plug the Q value into the total cost annual cost function to determine the total cost for each order quantity a. TAIC = RC + (R/Q)S + (Q/2)kC...
Compare the interest rate used in the loanable funds model with the interest rate in the...
Compare the interest rate used in the loanable funds model with the interest rate in the money market model. Why are they different? & How does an increase in interest rates affect the Aggregate Expenditure model as well as the AD/AS model. Be sure to draw graphs to illustrate. For, AD/AS, you should show movement from long run equilibrium to long run equilibrium. Thank you!
In a perpetual inventory system, the purchase of inventory is debited to: 1. Inventory 2. Cost...
In a perpetual inventory system, the purchase of inventory is debited to: 1. Inventory 2. Cost of Goods Sold 3. Accounts Payable 4. Purchases
Their price lists are shown in the table Ordering cost is $55, and annual holding cost per unit is $4
M.P. VanOyen Manufacturing has gone out on bid for a regulator component. Expected demand is 725 units per month. The item can be purchased from either Allen Manufacturing or Baker Manufacturing. Their price lists are shown in the table Ordering cost is $55, and annual holding cost per unit is $4    Allen Mfg.Baker Mfg.QuantityUnit PriceQuantityUnit Price1-499$16.00  1-399$16.10  500-99915.50400-79915.601000+15.00800+15.10a) What is the economic order quantity if price is not a consideration? b) Which supplier, based on all options with regard to discounts,...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT