Annual expected total relevant cost, Managerial Accounting

A purchased product, sold in a retail store, has a normally distributed daily demand, with a mean of 8 units/day and a variance of 4 (units)2. Its supply lead time is 6 days and the store is open 365 days a year. Currently, this item's inventory replenishment policy is based on a periodic review system with a review period of 30 days (dictated by the supplier) and an order-up-to level, i.e. maximum inventory position, of 250 units. The purchase cost of this product is $16 per unit, its ordering cost is $50 per order and the store's inventory carrying cost rate is $0.25/$/year. It is also estimated that the cost of not having sufficient stock to satisfy this item's demand routinely off the shelf is $40 per stockout incident.

(a) What is this item's cycle service level under the current ordering policy? Also, compute the average number of days between consecutive stockouts and the annual expected total relevant cost for this product.

(b) Based on a reassessment of current policy, management has specified that it is willing to tolerate an average of no more than one stockout per year for this item. How would you modify the current ordering policy to satisfy this requirement and what would be the resulting annual expected total relevant cost?

Posted Date: 2/25/2013 12:11:24 AM | Location : United States







Related Discussions:- Annual expected total relevant cost, Assignment Help, Ask Question on Annual expected total relevant cost, Get Answer, Expert's Help, Annual expected total relevant cost Discussions

Write discussion on Annual expected total relevant cost
Your posts are moderated
Related Questions
Prepare an estimation of working capital needs from the subsequent information of a trading relates with: (a) Projected Annual Sales 1,00,000

Graphic Analysis Whenever you have two data points, you should generally suppose a linear relationship. When you acquire more data, you can study the data to determine when there

What are the Advantages of contributionmargin analysis the concept of contribution is variable aid to management in making managerial decisions . a few benefits resulting from

what is Computerized Processing Systems

Q. Explain Phases of life cycle of a product? Every product move through a life cycle having five phases as shown in figure and they are 1) Pricing during introduction 2)

disadvantages of transfer pricing

Importance of a budget A Budget is a plan expressed in monetary terms. It is prepared prior to the budget period and may show income, expenses and the capital to be used i.e. a

What is Budgetary control Budgetary control is the process of determining various budgeted figures for the enterprises for the future period and then comparing the budgeted fi

Winner says, "It is clear that in decades to come a great many things like telephone answer machines and automatic bank tellers will become, in effect, members of our society." Mor

SIMULATION MODELS Simulation is a method of analyzing a system by experimentally duplicating its behavior. Management accountants can be able to make meaningful inferences conc