Please answer all parts for Upvote The local Ford dealer is concerned about having the right...

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Accounting

Please answer all parts for Upvote
The local Ford dealer is concerned about having the right amountof parts in their service department. One SKU is very expensive,costing the dealer $475. In a typical week, they use 24of these parts. Their supplier usually gets new orders to thedealer within 3 weeks. Currently they order 6 weeks work of theseparts at a time (ie, 144). They use a 12% annual carrying chargerate on all of their inventory.
a. For their current replenishment policy, what is theannual cost of carrying inventory?

b. For their current replenishment policy, what is the totalannual incremental inventory cost for thisitem?
c. Draw a rough graph of how the two competing costs of thisinventory policy behave as they try different reorder quantities.Label all components of the graph.
d. What is the EOQ for this item (calculate the number)?
e. If their current policy is not optimal, what type of cost orexpense do their need to attempt to improve in order to get to theoptimal, and why?
f. Suppose that they want to cut their order quantity down to,say, only 12 units at a time. What would the cost to reorder haveto be in order that this new policy be optimal?

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4.2 Ratings (779 Votes)

Cost per unit 475 Demand per week 24 units Annual Demand 24units52 weeks 1248 units Units per order 144 a Annual Carrying Cost Carrying cost pa 12 See Answer

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Please answer all parts for UpvoteThe local Ford dealer is concerned about having the right amountof parts in their service department. One SKU is very expensive,costing the dealer $475. In a typical week, they use 24of these parts. Their supplier usually gets new orders to thedealer within 3 weeks. Currently they order 6 weeks work of theseparts at a time (ie, 144). They use a 12% annual carrying chargerate on all of their inventory.a. For their current replenishment policy, what is theannual cost of carrying inventory?b. For their current replenishment policy, what is the totalannual incremental inventory cost for thisitem?c. Draw a rough graph of how the two competing costs of thisinventory policy behave as they try different reorder quantities.Label all components of the graph.d. What is the EOQ for this item (calculate the number)?e. If their current policy is not optimal, what type of cost orexpense do their need to attempt to improve in order to get to theoptimal, and why?f. Suppose that they want to cut their order quantity down to,say, only 12 units at a time. What would the cost to reorder haveto be in order that this new policy be optimal?