Consider the following history of supply and demand for new toasters from Valles

Question

Consider the following history of supply and demand for new toasters from Valles Global: umber of Items Receive emand During the Month 520 1640 670 425 280 550 ont January 200 February 175 75 arc April May June 950 500 2050 . Determine the ending inventory each month. Assume excess demands are back-ordered and starting inventory on 1 January is 480 . Assume that each time a unit is demanded that cannot be supplied immediately, a one-time charge of 10 dollars is made. Determine the stock-out cost incurred during the six months if on-hand stocks exceed demand at the end of the month (requiring back-order) Suppose that each stock-out costs 10 dollars that the demand remains unfilled. If demands are filled on a first-come, first-served basis, what is the total stock-out cost incurred during the six months using this criterion? Discuss under what circumstances the cost criterion used in part 2 might be appropriate and under what circumstances part three may be more

Explanation / Answer

Answer )

Answer 2)

One time cost of $ 10 is made in case of short fall ,

Here its clear from above table , short fall occured in month of Feb of 1285 units cost = 1285*10 = $ 12850 for six months

Answer 3)

cost of $ 10 is made in case of demand remain unfilled on every month  

- 36300

Total Cost of unfilled order = $ 36300

Answer 4)

Part 2 will be approprite , in case of supply made once generally in regular and continuous production system

Part 3 will be approprite , in case of supply made on regular basis in job or contract cost system

Inventory on 1 jan 480 Month Received Demand Difference In Received and demand Inventory (end of month) Short fall Jan 200 520 -300 180 Feb 175 1640 -1465 -1285 Mar 750 670 80 -1205 Apr 950 425 525 -680 May 500 280 220 -460 June 2050 550 1500 1040

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