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What is KCEW's annual holding cost for pipeline stock?

What is KCEW's annual holding cost for pipeline stock?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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KC Engineering Works (KCEW) sells compressors for air conditioning units to several HVAC dealers in the Midwest region. The annual demand for the compressors is 73,000 units. For the reasons of simplicity assume that the demand is uniform throughout the year. Each compressor unit weighs 10 lbs. KCEW buys the compressors at $150 a piece directly from the manufacturer based in Louisville, KY, in batch sizes that minimize its overall cost. They maintain a safety stock that is 25% of the demand during the lead-time and that the holding cost is 20%. They have received the following transportation proposals from different providers. Assume 365 days per year. Carrier Name Minimum Shipment Rate Lead Time (days) ($/cwt) 8.50 14.00 (cwt*) BNSF Railway 300+ 12 C.H. Robinson 50+ 8. UPS Supply Chain Solutions 100-200 12.00 200-400 10.00 9. 400+ 6.50 6. *1 cwt = 100 lbs. What is KCEW's annual holding cost for pipeline stock? $1,600 $73,000 O $240,000 O $800 O $48,000
Transcribed Image Text:KC Engineering Works (KCEW) sells compressors for air conditioning units to several HVAC dealers in the Midwest region. The annual demand for the compressors is 73,000 units. For the reasons of simplicity assume that the demand is uniform throughout the year. Each compressor unit weighs 10 lbs. KCEW buys the compressors at $150 a piece directly from the manufacturer based in Louisville, KY, in batch sizes that minimize its overall cost. They maintain a safety stock that is 25% of the demand during the lead-time and that the holding cost is 20%. They have received the following transportation proposals from different providers. Assume 365 days per year. Carrier Name Minimum Shipment Rate Lead Time (days) ($/cwt) 8.50 14.00 (cwt*) BNSF Railway 300+ 12 C.H. Robinson 50+ 8. UPS Supply Chain Solutions 100-200 12.00 200-400 10.00 9. 400+ 6.50 6. *1 cwt = 100 lbs. What is KCEW's annual holding cost for pipeline stock? $1,600 $73,000 O $240,000 O $800 O $48,000
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