Q2 part F G needed Question 1ABC company faces a monthly demand of 800 for a certain type of product. Currently they are orderingthe product from an offshore supplier in China. Due to production and shipping restrictions the companyplaces an order from this supplier every month. (i.e. the time between two orders is one months.) Everytime they place an order, they need to pay a fixed shipping cost of $120 to the supplier. Each product costs$50 to purchase from this supplier. The holding cost is based on 20% annual interest rate. It takes 0.5months for the supplier to process the order and the order arrive to the company.a)What is the average inventory level?b),Vhat is the reorder point?c)Calculate the annual inventory holding cost ABC company is currently incurring.d)Calculate the annual ordering cost ABC company is currently incurring.e)Calculate the economic order quantity for the given problem.f)company was using the economic order quantity you found in part (e)Calculate the optimal annual inventory holding cost that would have been incurred if theg)was using the economic order quantity you found in part (e)Calculate the optimal annual ordering cost that would have been incurred if the companyh}quantity?Calculate how much the company is losing because they cannot use the economic order Question 2Consider the company in Question 1. Now the company is considering working with a local supplier.Since the local supplier is located close to the company, there is no restriction on the frequency of theorders. The purchasing cost from this local supplier is $80 per unit. Every time they place an order thereis a fixed shipping cost of $12. Holding cost is again based on 20% annual interest rate.a)Calculate the economic order quantity.b)order quantity you found in (a)Calculate the total annual cost the company will incur with this supplier if they use the(Total Annual Cost = Annual Ordering Cost + Annual Inventory Holding Cost + Annual Purchasing Cost)The company is also considering producing the product at home. The production rate is 12000 units peryear. They estimate that the setup cost is $20 per setup. The production cost is $60 per unit. The holdingcost is based on the annual interest rate and the production cost of the product.c)Calculate the economic production quantity.d)How many production runs will be made each year?e)What percentage of the time the production machine will be working?f)Calculate the total annual cost the company will incur if they produce the product at home.g)Which option is less costly for the company, working with the local supplier or producing athome?

The question is related to Inventory Management. The Annual total production cost in house will be…

Question 1 ABC company faces a monthly demand of 800 for a certain type of product. Currently they are ordering the product from an offshore supplier in China. Due to production and shipping restrictions the company places an order from this supplier every month. (i.e. the time between two orders is one months.) Every time they place an order, they need to pay a fixed shipping cost of $120 to the supplier. Each product costs $50 to purchase from this supplier. The holding cost is based on 20% annual interest rate. It takes 0.5 months for the supplier to process the order and the order arrive to the company. a) What is the average inventory level? b), Vhat is the reorder point? c) Calculate the annual inventory holding cost ABC company is currently incurring. d) , Calculate the annual ordering cost ABC company is currently incurring. e) Calculate the economic order quantity for the given problem. f) company was using the economic order quantity you found in part (e) Calculate the optimal annual inventory holding cost that would have been incurred if the g) was using the economic order quantity you found in part (e) Calculate the optimal annual ordering cost that would have been incurred if the company h) quantity? Calculate how much the company is losing because they cannot use the economic order

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q