Homework SourseThe purchasing manager for Alpa Enterprises requested the fo
The purchasing manager for Alpa Enterprises requested the following data from the accounting department:
Annual demand = 15,500; Cost of placing an order = £180; Annual inventory holding costs = 20 percent; Unit cost = £78
Suppose Alpha has been arbitrarily ordering 50 times per year. What is the total annual inventory cost?
The purchasing manager for Alpa Enterprises requested the following data from the accounting department:
Annual demand = 15,500; Cost of placing an order = £180; Annual inventory holding costs = 20 percent; Unit cost = £78
Suppose Alpha has been arbitrarily ordering 50 times per year. What is the total annual inventory cost?
The purchasing manager for Alpa Enterprises requested the following data from the accounting department:
Annual demand = 15,500; Cost of placing an order = £180; Annual inventory holding costs = 20 percent; Unit cost = £78
Suppose Alpha has been arbitrarily ordering 50 times per year. What is the total annual inventory cost?
Solution
Total Annual inventory cost= Annual ordering cost + Annual holding cost Annual ordering ocst = Total orders per year *cost per order =50* £180 = £9000 Annual Holding cost = Average inventory *Unit cost *Persentage of holding cost Inventory Per order = annual Demand / No of Orders =15500/50 =310 Annual holding cost = (310/2)* £78*20% = £2418 Total Annual Inventory cost = £9000+ £2418 = £11418
