The inter-relationship of the various costs related to inventory management should be concluded. Concept Introduction: Inventory is created by ordering to the supplier. This has a cost called the ordering cost. Further, the inventory costs: To hold the stocks in spaces, storing and handling, etc. The capital locked in the inventory value has an interest cost associated with it. Both these costs are called the holding costs (for the inventory). Both the costs together i.e. the ordering and the holding costs are the total costs involved for inventory management. This total cost needs to be minimized/optimized. It is very important to understand the behaviors of these costs with respect to each other.

Question

Want to see the full answer?

Answer 1

Question

Chapter 9, Problem 3AME

Summary Introduction

Interpretation: The inter-relationship of the various costs related to inventory management should be concluded.

Concept Introduction: Inventory is created by ordering to the supplier. This has a cost called the ordering cost. Further, the inventory costs:

To hold the stocks in spaces, storing and handling, etc.

The capital locked in the inventory value has an interest cost associated with it.

Both these costs are called the holding costs (for the inventory).

Both the costs together i.e. the ordering and the holding costs are the total costs involved for inventory management. This total cost needs to be minimized/optimized.

It is very important to understand the behaviors of these costs with respect to each other.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

For the purpose of process analysis, which of the following measures would be considered an appropriate flow unit for analyzing the main operation of a local accounting firm? Instructions: You may select more than one answer. a. Number of accountants working each week b. Number of tax returns completed each week c. Number of customers with past-due invoices d. Number of reams of paper received from suppliers

4. Based on the data provided in Table 2.5, what is the flow rate of callers from 8:00 a.m. to 8:20 a.m.? TABLE 2.5 Time Stamps of the Eight Callers Who Called from 8:00 a.m. to 8:20 a.m. to the Reservation Desk of a Ferry Service Caller Time In Time Out 1 8:01 8:05 2 3 4 5 6 8:02 8:07 8:06 8:08 8:09 8:12 8:10 8:15 8:12 8:20 7 8:16 8:19 8 8:17 8:19 5. Based on the data provided in Table 2.5, what is the flow time of callers from 8:00 a.m. to 8:20 a.m.? 6. Based on the data provided in Table 2.6, what is the flow rate of customers from 9:00 a.m. to 10:00 a.m.? TABLE 2.6 Time Stamps of 10 Customers Who Visited a Local Bank Branch from 9:00 a.m. to 10:00 a.m. Customer 1 2 3 4 5 6 7 8 9 10 Time In Time Out 9:01 9:07 9:06 9:21 9:08 9:20 9:14 9:19 9:20 9:28 9:26 9:33 9:31 9:39 9:40 9:46 9:44 9:59 9:53 9:57 7. Based on the data provided in Table 2.6, what is the flow time of customers from 9:00 a.m. to 10:00 a.m.?

How is Little’s Law currently used in today’s supply chains? Provide an example of where it is used.