We Care Associates (WCA), a local physician practice group, orders supplies from various distributors. Order quantities of fifteen items have been determined based on the past five years of usage. Other relevant information from the practice’s inventory records is depicted in Table EX 11.8. The practice is functional for fifty-two weeks a year. Item No. Weekly Demand (Unit/Week) Unit Cost ($) Yearly Carrying Rate of Each Item Ordering Cost ($) 1 400 2.50 15% 12.00
Exercise 11.8
We Care Associates (WCA), a local physician practice group, orders supplies from various distributors. Order quantities of fifteen items have been determined based on the past five years of usage. Other relevant information from the practice’s inventory records is depicted in Table EX 11.8. The practice is functional for fifty-two weeks a year.
|
Item No. |
Weekly Demand (Unit/Week) |
Unit Cost ($) |
Yearly Carrying Rate of Each Item |
Ordering Cost ($) |
|
1 |
400 |
2.50 |
15% |
12.00 |
|
2 |
1,600 |
0.50 |
16% |
6.00 |
|
3 |
175 |
37.50 |
20% |
32.00 |
|
4 |
250 |
3.5 |
12% |
50.00 |
|
5 |
250 |
1.75 |
18% |
12.00 |
|
6 |
32 |
2,300.00 |
2% |
35.00 |
|
7 |
1,500 |
1.25 |
14% |
10.00 |
|
8 |
2,200 |
0.65 |
17% |
6.00 |
|
9 |
1,270 |
0.95 |
21% |
5.00 |
|
10 |
120 |
12.50 |
12% |
12.00 |
|
11 |
220 |
2.00 |
15% |
28.00 |
|
12 |
350 |
1.50 |
14% |
18.00 |
|
13 |
18 |
5,000.00 |
2% |
25.00 |
|
14 |
6 |
6,700.00 |
2% |
50.00 |
|
15 |
1,250 |
2.60 |
22% |
19.00 |
- Determine the basic EOQ on each item.
- Provide the A-B-C classification of these items.
- Calculate the yearly cost of inventory management.
- Calculate the investment cost (per cycle) for each item.
- Explain the difference between inventory management cost and investment cost.
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