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Material inventory control topic ,help required

Forums › FIA Forums › MA2 Managing Costs and Finance Forums › Material inventory control topic ,help required

  • This topic has 5 replies, 4 voices, and was last updated 8 years ago by shahzaibshaukat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • April 6, 2015 at 3:00 pm #240301
    myacca1990
    Participant
    • Topics: 153
    • Replies: 164
    • ☆☆☆

    Q: A manufacturing organisation uses 5,000kg of a raw material evenly over a period.The purchase price is $6.50 per kg and the holding cost per period is 10% of purchase price.If the order quantity is 500 kg and a buffer inventory of 100 kg is held,the total holding cost of the raw material in the period is:
    A)$195
    B)$227.50
    C)$325
    D)$3,250
    According to kaplan the right answer is B but how and why ?

    April 7, 2015 at 6:27 am #240378
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    If reorder quantity is 500, the average inventory will be:

    500/2 + 100 (buffer stock) = 350

    It is assumed that the 500 is used up evenly and that the 100 is always there. (Stock usage is irrelevant to holding costs).

    350 x 6.50 x 10% = 227.5

    April 7, 2015 at 10:20 pm #240461
    myacca1990
    Participant
    • Topics: 153
    • Replies: 164
    • ☆☆☆

    @Gromit said:
    If reorder quantity is 500, the average inventory will be:

    500/2 + 100 (buffer stock) = 350

    It is assumed that the 500 is used up evenly and that the 100 is always there. (Stock usage is irrelevant to holding costs).

    350 x 6.50 x 10% = 227.5

    All clear thanks for the help Sir! 🙂

    June 17, 2015 at 4:46 am #257368
    alihussain
    Member
    • Topics: 3
    • Replies: 15
    • ☆

    dear sir my question is:

    a retailer has a steady demand for rugby balls at 50 a month.each ball cost $6 from the supplier.the cost involved in placing an order $10 and the stockholding cost are 20% of the stock holding value per annum. how many orders will b placed per anum?
    a. 1.73
    b. 6
    c. 8.48
    d. 100

    what is the stockholding cost in this question and EOQ module will b use in his question?

    June 17, 2015 at 8:09 am #257391
    alihussain
    Member
    • Topics: 3
    • Replies: 15
    • ☆

    dear sir i have another question:
    a business uses 69000 units of an item every year and works for 52 weeks per year.there is a delay of three weeks between placing and recieving an order.
    what should be the reorder level to ensure that inventory arrives just as it is needed?

    answer is 3750 but how?plz explain it

    March 10, 2017 at 4:18 am #377284
    shahzaibshaukat
    Member
    • Topics: 0
    • Replies: 1
    • ☆

    Your question is wrong,the answer of 3750 could only be correct if annual demand would be 65000, i.e
    Reorder-level=Max.Usage*Max Lead Time
    Max usage=65000/52 *3
    =3750

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