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
Arrival Rates, Service Rates, and Traffic Intensity The (average) arrival rate is the rate of arrival of customers at a queue, and is often denoted by x. If 10 customers arr

Analysis of Financial Ratios: Ratios are computed to find out the customer's liquidity position and capability to repay debts. The computed ratios must be compared along with the

QUEUING THEORY When limited facilities fail/delays to satisfy demands made upon them, problems occur which generate queues or waiting lines. Illustrations are: •    Customers

how long will it take to get answers after question are submitted

State Factors determining Working Capital requirement.

Case Study Labor standards Geeta & Company has experienced increased production costs. The primary area of concern identified by management is direct labor. The compa

Ask question #MRead ALL instructions before getting started! ABC Corporation is a new company that buys and sells office supplies. Business began on January 1, 2014. Given on th

Liquidity ratios Liquidity refers to the ability of concern to meet its current obligations as and when these become due. The short term obligations are met by realizing amount

Monitor Let's start by having you think about the controlling your car (aka "driving")! Your steering, acceleration, and braking are not the random things to be done; they are

Hornsby Manufacturing has four categories of overheads. The four categories and the expected overhead costs for each category for next year are as follows:   Maintenance  $140,000