Copy Of Copy Of Copy Of Gentle Electric Part 2 x4ur

Exercise Solution Gentle Electric Company Name: Uzoigwe kelechi_jennifer Objective: To decide the ordering policy at Gentle electric for transformers used in the production of control units for enger and freight elevators. Analysis: With the information compiled my Mr. Edison we can calculate the total inventory cost for gentle electric. The total annual cost equation can be written as below. Annual Total Cost = Material cost + Ordering cost + Inventory Carrying cost + Transportation cost + Unloading cost + Additional warehouse space cost (when required) Please provide your logic/formula used to calculate the following cost components. Material Cost:total fixed costs +total cost \total unit produced Ordering Cost:fixed cost*requisitions per number of orders in a year *cost of each order Inventory Holding cost: This is calculated as a fraction of the inventory investment x the average inventory, The holding cost will be H = I x Cu x (Q/2) – where: Q is the order quantity under consideration. Given that you do not have information about the lead time and the demand, assume a constant rate of depletion for the inventory thus the average inventory will be Q/2. I is the fraction of the inventory investment representing the holding cost. Cu is the cost per unit. Transportation cost: full load *per car load+LCL units*shipping cost per unit =(per mile cost *weight per unit*distance) Additional warehouse space cost: total volume ordered +cost per unit of order Unloading cost: fixed cost *cost per unit *cost of loading*quantity sent +quantity received

Based on the analysis the recommended order quantity 600000 units, which implies 4.0 requisitions per year and the total estimated cost of following this recommended order policy is $ 638550.00.

Exercise Solution

Exercise Solution Appendix: Please insert a copy of the table from excel and a graph of the final cost behavior as it changes with order Quantity.