Question

Answer the questions using the following information. Do calculations on back or a separate sheet of paper. Place only your final answer in boxes provided. No partial credit will be given. Round answers to nearest whole number for Q5-7. Q1-4 = 1 pt. each. Q5-7 = 2 pts. each.

Daily sales = 325 units                                                 Cost of capital = 22.5%

Std. deviation of daily demand = 39                           Inventory Risk = 1.5%

Cost to place an order = $30                                      Storage space = 5.5%

Freight cost = $250                                                     Insurance = 0.75%

Avg. Inventory (last 12 months) = 2,750 units            Current number of warehouses = 24

Cost of 1 unit of inventory = $125                              Prime interest rate = 3.9%

Cost of Goods Sold = $14,828,125                              Taxes = 1.25%

Selling price of 1 unit = $250                                      Average annual depreciation = 15.5%

Avg. replenishment cycle = 11 days                           Std. dev. of replenishment cycle =3 days

Average inventory value = $343,750                          Forecast error = 12.5%

Re-stock fee is $55                                                      Days in a year = 365

                                   

1. What is the ICC%?

(to the nearest tenth

of a percent)

2. What is the value of R?

(in the EOQ formula)

3. What is the value of V?

4. What is the value of S?

(to the nearest cent)

5. What is the value of Q?

6. If the company plans to close 12 of their warehouses over the next 12 months, how much inventory should they expect to have a year from now?

7. How much safety stock should the company hold if it wants to ensure a 98.3% service level?

         A_t-1 + A_t-2 + A_t-3 + ... + A_t-n

F_t =                      n

F_t = w₁(A_t-1) + w₂(A_t-2) + w₃(A_t-3) + ... + w_n(A_t-n)                    

F_t = F_t-1+ a(A_t-1 - F_t-1)

MAD=1n *t=1n|At-Ft|

MAPE=1n *t=1n[|At-Ft|At­­­­*100%]

TAC = QVW + AR                     TAC = QS + AR                   S = VW                     

               2         Q                                    2      Q

     

Q=   2 RA                                  Q =   2RA                              ROP = LT * DD

          VW                                                S

TAC = QVW + AR + eVW + GR                                                         

            2         Q                   Q

SS = Z * √ R(ss²) + S²(sR²)

X₂= X₁ √ n₂ / n₁                                                                                                              

   ICC = CC + SC + IS + IR

   IT = COGS / AI                       

Answer 1

Answer:

Given data

Daily sales = 325units                        

Cost of capital = 22.5%

Std. deviation of daily demand = 39                           Inventory Risk = 1.5%

Cost to place an order = $30                                 

Storage space = 5.5%

Freight cost = $250                                                    

Insurance = 0.75%

Avg. Inventory (last 12 months) = 2,750 units            Current number of warehouses = 24

Cost of 1 unit of inventory = $125                             

Prime interest rate = 3.9%

Cost of Goods Sold = $14,828,125                             

Taxes = 1.25%

Selling price of 1 unit = $250                                    

Average annual depreciation = 15.5%

Avg. replenishment cycle = 11 days                           Std. dev. of replenishment cycle =3 days

Average inventory value = $343,750                          Forecast error = 12.5%

Re-stock fee is $55                                                      Days in a year = 365

a)What is the ICC%

ICC = Cost of capital + depreciation cost + interest rate + inventory risk +storage space + insurance + taxes.

= 22.5 % + 15.5 % +3.9 % +1.5% +5.5 % +0.75% +1.25%

= 50.9%

b)What is the value of R.

R = (Load time * daily usage / sales ) + Safety stock

= ( 12 * 325 ) + [( 39 * 12 ) + 3 (325 + 39 )]

= 3,900 +[ (468 + 1,092)]

= 3,900 + 1560

= 5,460 units

c)What is the value of V.

Value of V is unit production cost is

V = $ 125

d) What is the value of S.

Value of S = Cost to place an order + frieght cost +Re - stock Fee

= 30 + 250 +55

= $ 335

e)What is the value of Q.

  Value of Q =

S = $ 335

D = Daily sales * Days in a year

D = 325 * 365

= 1,18,625

4 = 2750 * 125 * 0.055

4 = 18,906.25

Q =

= 64.83

B) If the company plans to close 12 of their warehouses over the next 12 months, how much inventory should they expect to have a year from now.

Current ware house = 24

Ware house after 1 year = 12

So , only 50% of the warehouses will be remaining

Average inventory cost = 2,750

Average inventory after 1 year = 2,750 * 50%

= 1,375 units

C)How much safety stock should the company hold if it wants to ensure a 98.3% service level.

Safety stock = Service factor * S.D of lead time * Demand average.

Service factor (Z) for 98.3% reliability is = 2.11

S.D of lead time = 3 days

demand = 325 units per day

Safety stock = 2.11 * 3 * 325

= 2057 units