ABC stocks a switch connector at its warehouse to supply offices. The annual demand for these connectors is 32,000 units. ABC estimates its annual holding cost for these to be $20 per unit. The cost to place and process an order from the supplier is $50. The company operates 320 days per year and the lead time to receive an order from the supplier is 2 working days. The company’s inventory policy states that they should place 64 orders throughout the year and each order will be for 500 units. The new supply chain manager who just joined ABC questions the optimality of this policy and understand how much ABC would save if they had implemented economic order quantity (EOQ).a) What is the total cost of the inventory policy (ordering 500 units)?b) What is the economic order quantity (EOQ) for this product? c) What is the total cost of following EOQ policy? How much ABC would save by switching to EOQ?d) What should be the reorder point?
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.
ABC stocks a switch connector at its warehouse to supply offices. The annual demand for these connectors is 32,000 units. ABC estimates its annual holding cost for these to be $20 per unit. The cost to place and process an order from the supplier is $50. The company operates 320 days per year and the lead time to receive an order from the supplier is 2 working days. The company’s inventory policy states that they should place 64 orders throughout the year and each order will be for 500 units. The new
a) What is the total cost of the inventory policy (ordering 500 units)?
b) What is the economic order quantity (EOQ) for this product?
c) What is the total cost of following EOQ policy? How much ABC would save by switching to EOQ?
d) What should be the reorder point?
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