A company is planning to purchase 90,800 units of a particular item in the year ahead. The item is purchased in boxes each containing 10units of the item, at a price of $200 per box. A safety inventory of 250 boxes is kept. Besides, the company estimates to be charged the transporation cost of $15 per order. It should be assumed that ordering costs change in proportion to the number of orders place. The cost of holding an item in inventory for a year (including insurance, interest and space costs) is 15% of the purchase price. The cost of placing and receiving orders is to be estimated from cost data collected relating to similar orders, where costs of $5,910 were incurred on 30 orders. It should be assumed that ordering costs change in proportion to the number of orders placed. 2% should be added to the above ordering costs to allow for inflation. Assume that usage of the item will be even over the year. Required a. Calculate the order quantity that would minimize the cost b. Determine number of order in a year. c. Determine the required frequency of placing orders (in week)
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
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A company is planning to purchase 90,800 units of a particular item in the year ahead. The item is purchased in boxes each containing 10units of the item, at a price of $200 per box. A safety inventory of 250 boxes is kept.
Besides, the company estimates to be charged the transporation cost of $15 per order. It should be assumed that ordering costs change in proportion to the number of orders place. The cost of holding an item in inventory for a year (including insurance, interest and space costs) is 15% of the purchase price. The cost of placing and receiving orders is to be estimated from cost data collected relating to similar orders, where costs of $5,910 were incurred on 30 orders. It should be assumed that ordering costs change in proportion to the number of orders placed. 2% should be added to the above ordering costs to allow for inflation. Assume that usage of the item will be even over the year.
Required
a. Calculate the order quantity that would minimize the cost
b. Determine number of order in a year.
c. Determine the required frequency of placing orders (in week)
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