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A wholesale company is reviewing its inventory costs for a high volume item which has an annual demand of 72,000 units, with a per unit purchase price of $10. The ordering cost is estimated at $25, and the annual inventory carrying cost for the warehouse is computed at 30% of the price while the in-transit shipping factor is 13%. The in-transit shipping time is 14 days with a per unit transit cost of $1.50. Forecasted average demand is 200 units per day with a standard deviation of the forecast error of 20 units per day. The average order lead time is 16 days with a standard deviation of order lead time of 3 days. A 98% service level is to be maintained. There are 360 days in a year.

What is the Annual Transit Cost for this product?

a. $108,000.00

b. $365,228.56

c. $300.00

d. $1,928,338.51

What is the Total Annual Cost for this product (roughly)?

a. $210,650

b. $189,330

c. $103,280

d. $119,990

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M92599669

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