point Use the following scenario and data for all questions Demand for a specifi
ID: 326348 • Letter: P
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point Use the following scenario and data for all questions Demand for a specific design of dinning sets has been fairly large in the past several years and Statewide Furnishings, Inc. usually orders new dinning sets 10 times a year. It is estimated that the ordering cost is $400 per order. The carrying cost is $50 per unit per year. Furthermore, State Wide Furnishings, Inc. has estimated that the stock out cost is $120 per unit per year. Based on forecast, the annual demand is 600 units. State Wide Furnishings, Inc. has 350 working days in a year and its lead time is 14 working days.Explanation / Answer
Answer 7 : Option E : None of the Above
Annual Holding Cost: The annual holding cost will be very minimumor close to zero, because the shortage cost is not the lost sale cost. Means the store manager is sure and confirms that due to shortage of the materials, the sale is not lost, and the customers will purchase from our organiztaion only once the material is reached at our office/ plant. Thus the shortage cost do not results in loss of sales. Thus in this case, the annual holding cost can be close to zero or nil.
Answer 8 : Option E : None of the Above
Annual Shortage Cost: The annual shortage cost will be very minimum or close to zero, because the shortage cost is not the lost sale cost. Means the store manager is sure and confirms that due to shortage of the materials, the sale is not lost, and the customers will purchase from our organiztaion only once the material is reached at our office/ plant. Thus the shortage cost do not results in loss of sales. Thus in this case, the annual shortage cost can be close to zero or nil.
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