4-Screen 16-Screen Custorm View -) cl ezto.mheducation.com/hm.tpr 20 Foods Galor
ID: 411392 • Letter: 4
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4-Screen 16-Screen Custorm View -) cl ezto.mheducation.com/hm.tpr 20 Foods Galore is a major distributor to restaurants and other institutional food users Foods Galore buys cereal from a manufactur the company believes that the demand is constant at 880 cases per day for each of the 250 days per year that it is open for business. Average lead time from the supplier for replenishment orders is six days, and the company believes that it is also constant The purchasing agent at Foods Galore beleves that annual inventory carrying is 20 percent and that it costs $60 to prepare, send, and receive an order. Use lable.72 er for $28 per case Annual demand for cereal is 220,000 cases, and a-1. How many cases of cereal should Foods Galore order each time it places an order? (Round your answer the nearest whole number) a-2. What will be the average inventory? (Round your answer to 1 decimal place.) 201 a-3. What vwill be the inventory turnover rate? (Round your answer to 1 decimal place.) a-4 Calculate the total annual cost based on a product cost of $28/unit (Do not round intermediate calculations Round your answer to 2 decimal places.)Explanation / Answer
PLEASE FIND BELOW ANSWERS TO FIRST 4 QUESTIONS :
Answer to Question a.1:
Annual demand of cereals = D = 220,000 cases
Ordering cost = Co = $60
Annual Unit inventory holding cost = Ch = 20% of $28 = $5.6
Thus number of cases of cereal food Galore should order ( as per Economic Order Quantity model EOQ )
= Square root ( 2 x Co x D / Ch)
= Square root ( 2 x 60 x 220,000/5.6)
= 2171.24 ( 2171 rounded to nearest whole number )
FOOD GALORE SHOULD ORDER 2171 CASES OF CEREAL
Answer to question a.2:
Average inventory = Economic Order quantity / 2 = 2171/2 = 1085.5
AVERAGE INVENTORY = 1085.5 CASES
Answer to question a.3:
Inventory turnover rate = Annual demand / Average inventory = 220,000/1085.5 = 202.7
Answer to question a.4 :
Total annual cost based on product cost of $28 / unit
= Annual product cost + Annual ordering cost + Annual inventory holding cost
= Annual demand x Unit product cost + Ordering cost x Number of orders + annual unit inventory holding cost x Average inventory
= 220,000 x 28 + Ordering cost x Annual demand/ Economic order quantity + 5.6 x 1085.5
= 220,000 x 28 + 60 x 220,000/2171 + 5.6 x 1085.5
= 616,0000 + 6080.14 + 6078.8
= $628158.94
TOTAL ANNUAL COST = $628158.94
FOOD GALORE SHOULD ORDER 2171 CASES OF CEREAL
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