Expected total annual holding cost plus ordering cost

Assignment Help Operation Management

Reference no: EM131035394

First City Bank orders cash from the Federal Reserve Board to meet daily transaction needs. Linda Davis, the operations manager, estimates that $5,000,000 in cash will be needed next month. She has estimated that the cost to order, receive, and store each shipment of cash from the Federal Reserve Board will be $675 per shipment. First City Bank is open for business 250 days each year. These are considered its working days for the year. The bank’s related carrying cost for cash is 0.65 percent per month. That is, each dollar held in the bank’s vault costs $0.0065 per month in foregone profits.

a) How much should Linda order from the Federal Reserve Board each time a cash order is placed if she wants to minimize her cost?

b) What is the expected total annual holding cost plus ordering cost?

c) If the lead time is 3 days what is the reorder point? Also, what is the inventory position immediately after reordering?

d) If it is against First City Bank’s policy to order more than $750,000 when placing a cash order. How much should it order each time? Explain or support your answer.

Reference no: EM131035394

Questions Cloud

Regarding awards of punitive damages : Which of the following is true regarding awards of punitive damages?

Under federal law-employers can require employees : Which of the following is true regarding whether employers can require employees to provide access to their Facebook account as part of the hiring process and then as a term and condition of employment? Under federal law, employers may require employ..

Current switch design is composed of two components : USA Company’s current switch design is composed of two components, A and B, in series. The company wants to upgrade the reliability of the switch. As one option, the company is considering the switch option shown below. The reliability of A is 0.9, a..

Identify an issue with the roles of employees : The team members come from many departments. Two members are hardware designers, another is a representative from manufacturing, three are Brazil experts, one is the South America marketing manager, and the final member is the person who will manage ..

Expected total annual holding cost plus ordering cost : First City Bank orders cash from the Federal Reserve Board to meet daily transaction needs. Linda Davis, the operations manager, estimates that $5,000,000 in cash will be needed next month. How much should Linda order from the Federal Reserve Board e..

Contract negotiation methods and pricing as follows : Donald Trump described his contract negotiation methods and pricing as follows, "When I build something for somebody, I always add $50 million or $60 million onto the price. My guys come in, they say it's going to cost $75 million. I say it's going t..

Find reorder point for law reorder point for the law firm : A printing company has a contract with a legal firm to copy their court documents. Daily demand is a constant at 15000 pages to be copied. The mean lead time for the contractor is 4 days with a standard deviation of 0.75 days for delivering copies. F..

What is the annual cost for ordering and holding inventory : ABC Co. can manufacture a subcomponent at the rate of 500 per day when required. Its annual demand for this item is 60000 units. Assume 250 working days per year. Holding cost is $15 per unit per year. Set-up cost is 500 per set-up. find Economic pro..

Strategy to the company own particular circumstances : Which of the following is NOT an analytical tool for revealing a company's competitiveness and for helping to match the strategy to the company's own particular circumstances?

User Account

All Pages