Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. inventory control subject to known demand (1) a fo

Inventory control subject to known demand (1) A food store considers importing a special kind...

50.1K

Verified Solution

Question

Accounting

Inventory control subject to known demand (1)

A food store considers importing a special kind of smoked sausages for sale. The store estimates that the demand is stable at 2100 per year. The cost of placing an order and get it delivered is $ 2000., and the cost of the sausages is $18.50. each. The store uses an annual internal interest rate of 22% for the cost of capital. In addition, they operate with a storage cost of 3% of the value of the item, and a cost of 2% for taxes and insurance.

  1. What is the optimal order size of the sausages and how often should they be ordered?
  2. What is the ordering cost and the holding cost with this strategy?
  3. How many sausages should be on stock when a new order is placed if the lead - time is 3 weeks?
  4. The market price for a sausage is estimated to $30. What annual profit can the store expect on this product?
  5. The manager of the store realizes that the sausages will have a shelf life of 6 weeks after they are delivered at the store. How will this affect the ordering strategy? What will the holding costs, the ordering costs and the profit be with this new assumption

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students