Question

Sony Electronics hires Mr. Mark Gunther of Brockhart & Kaitlin in order to manage inventory operations. Sony has a supplier that produces electronic circuit boards for its TV sets. Sony currently pays $200 for each circuit card, and consumes an estimated 30,000 cards in a year. It costs Sony $600 to place an order to its supplier. The unit inventory holding cost is estimated to be equal to 30% of the purchasing price.

The annual ordering cost is

The annual carrying cost is

The annual purchasing cost is

The annual total cost is

Answer 1

	Annual demand= demand per Month*12		30000
	cost per order		$                 600.00
	item cost		$                 200.00
	holding cost percent		30.0%
Answer a	holding cost per year= holding cost percent*item cost		$                    60.00
Answer b	EOQ= SQRT(2*Cost per order*D/holding cost per year)		774.6
	#orders per year = Annual demand/ordered quantity		38.73
	Average inventory= EOQ/2		387.30
Answer d	annual holding cost= EOQ*holding cost per year/2		$              23,237.9
Answer c	Total order cost= No. of orders*order costr		$              23,237.9
	total cost of ordering+holding cost		$            46,475.80
Answer e	Total purchasing cost= annual demand*cost per order		$          18,000,000

Answer f: Annual total cost= total cost of ordering+holding cost+ Total purchasing cost= $ 18,046,475.80