Baseball Card Emporium Baseball Card Emporium (BBE) of Lewistown, Pennsylvania,
ID: 369488 • Letter: B
Question
Baseball Card Emporium Baseball Card Emporium (BBE) of Lewistown, Pennsylvania, is a distributor of baseball cards to sports card retailers. Its market area encompasses most of Pennsylvania, eastern Ohio, and New Jersey. The cards are printed in Neenah, Wisconsin, and currently shipped to Lewistown via motor carrier transportation. Kenny Craig, vice president of logistics, has asked his staff to evaluate using air carrier service to ship the cards. Nick Gingher, director of distribution, has collected the following information: Annual demand: 5000 cases of cards Case Value: $200 each Annual Inventory Carrying Cost: 28% Cost per order to replenish inventory: $100 In-transit inventory carrying cost: 18% Transit time using motor carrier: 5 days Transit time using air carrier: 2 days Motor carrier rate: $0.80 per cwt (100 lbs) Air Carrier rate: $1.50 per cwt Unit weight: 50 lbs per case what is Total Cost using Air Carrier?
Explanation / Answer
Annual demand, D = 5000 cases
Ordering cost, S = $ 100
Case value = $ 200
Holding cost of cycle stock, Hc = 200*0.28 = $ 56 per unit per year
Holding cost of transit stock, Ht = 200*0.18 = $ 36 per unit per year
Economic Order Quantity = (2DS/Hc) = (2*5000*100/56) = 134 cases
Annual ordering cost = (D/Q)*S = (5000/134)*100 = $ 3742
Annual holding cost of cycle stock = (Q/2)*Hc = (134/2)*56 = $ 3742
Annual holding cost of transit stock = D*Ht*transit time days/days in a year = 5000*36/365 = $ 493
Annual air freight cost = (5000*50/100)*1.5 = $ 3750
Total annual cost of using air carrier = Ordering cost + Holding cost of cycle stock + Holding cost of transit stock + Air freight cost
= 3742+3742+493+3750
= $ 11,727
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.