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6 . Somerset Corporation purchases a particular brand of microchip used in the assembly of computers directly from the supplier. It costs the company RM
Somerset Corporation purchases a particular brand of microchip used in the assembly of computers directly from the supplier. It costs the company RM each time it places an order with the manufacturer for the microchips. The supplier will deliver order of any size for a charge of RM and cost of holding an item in inventory for a year is estimated to be of the cost price. Samuel, the store manager estimates that total annual demand for the microchip will be units, with a constant demand rate throughout the year. Currently, the store is making orders, two times in a month. Goods are received days after an order has been placed. The store is open for business days in a year.
a Calculate the total inventory cost based on the current ordering policy.
b Compute the optimum order quantity and calculate the associated minimum total inventory cost.
c Based on the optimum order quantity, determine the reorder point.
d If the supplier offers large order discounts of and for single order quantities of minimum and respectively, should the company change its ordering policy?
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