Electronics Ltd manufactures air conditioners. It purchases 200,000 units of a particular type of compressor part, CU30, each year at a cost of $64 per unit. Annual carrying cost (for insurance, material handling, breakage etc) per unit is 5% of the unit purchase price. Currently Electronics Ltd places 50 orders for 4,000 units each year and ordering costs per purchase order are $18. a) Calculate the current annual ordering cost. b) Calculate the current annual carrying cost. c) What is the current total stock administration cost?
(i) Electronics Ltd manufactures air conditioners. It purchases 200,000 units of a particular type of compressor part, CU30, each year at a cost of $64 per unit. Annual carrying cost (for insurance, material handling, breakage etc) per unit is 5% of the unit purchase price. Currently Electronics Ltd places 50 orders for 4,000 units each year and ordering costs per purchase order are $18.
a) Calculate the current annual ordering cost.
b) Calculate the current annual carrying cost.
c) What is the current total stock administration cost?
d) Calculate the EOQ.
e) What is the minimum ordering cost?
f) What is the minimum storage cost?
g) What is the minimum total stock administration cost?
h) How much savings would Electronics Ltd. make using the EOQ policy, rather than the current policy of purchasing 4,000 units per order.
(ii) Maximum usage for Electronics Ltd. for any one week is 1,000 units and the minimum usage 400 units. Suppliers take anywhere from 2 to 4 weeks to deliver supplies after the order is placed. Using the EOQ policy, determine the re-order level, minimum level & maximum level of inventory.
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