Problem -
Best Bikes produces bicycles and buys brakes from a supplier in Japan. The brake set for one bicycle costs $125, and it is $35 to process the order with the supplier. The company consistently sells 50 bicycles a week (for 52 weeks of the year) and holds an average of 1 week of brake sets in inventory to cover the constant lead time from Japan. The company uses a holding/carrying rate of 20%
1. What is the average inventory carrying/holding cost for the brakes?
2. What is the EOQ for the brakes?
3. What is the ROP for the brakes?
4. What is the total annual inventory cost for the brakes?
5. What buying/purchasing strategy would be most appropriate for the brakes and why?
The information below shows products your company produces, their demand, cost and currently inventory levels.
|
Product #
|
Cost ($)
|
Annual Volume (units)
|
Average Inventory (units)
|
|
A246
|
$1.00
|
22000
|
5600
|
|
B615
|
$0.25
|
3500
|
120
|
|
C024
|
$4.25
|
1468
|
348
|
|
L227
|
$1.25
|
440
|
1200
|
|
N376
|
$0.50
|
40000
|
800
|
|
P112
|
$2.25
|
1600
|
352
|
|
R116
|
$0.12
|
25000
|
2100
|
|
R221
|
$12.00
|
410
|
80
|
|
T049
|
$8.50
|
124
|
50
|
|
T519
|
$26.00
|
10
|
300
|
6. Classify these products into A-B-C based on their volume and inventory levels. Are the products stocked correctly and why or why not?