A company distributes equipment for firefighters. Approximately 50% of the SKUs of the company are imported and the rest are purchased from local suppliers. The company is managed so that its capital depends mostly on the bank.

The Owner has traditionally used simple decision rules to ask for product from suppliers. He orders three weeks of supplies for SKUs that cost $ 10 per unit or more and six weeks of provisions for products that cost less than $ 10 per unit.

Last year the average inventory of the company was $ 1,000,000. $ 19,500 was paid for the interest generated by the bank loan, $ 80,000 for warehouse rent and $ 15,000 for the insurance companies.

i= (sum all the inventory carrying cost)/value($) of the average inventory=

The following six products belong to 30% of the company's annual sales, and are, according to the owner, the star products:

The following table includes the labor costs for placing orders, considering the people usually involved in placing an order.

Additionally, there is an extra $10 ordering cost regarding the charge made by the bank for the letter of credit for imported items, the bank charges $ 0.25 per order for items purchased from domestic suppliers.

a) Estimate the inventory carrying cost for this company (as a percentage of the unit cost).calculate i

b) Estimate the ordering cost for imported products and for domestic productsA_domestic A_imported

c) Calculate the EOQ for the six products

d) Calculate the total relevant cost for the six products, given the original lot sizes of 3 and 6 weeks.

e) Calculate the total relevant cost for the six products based on their EOQ.

f) Calculate the cost difference of paragraphs d and e.

g) Calculate the number of replenishments for the six products under the current situation and under the EOQ policy

SKU Unit cost Weekly Demand Actual Q =6400/52 =WD*3 1 15.78 2* 40.50 3* 18.30 4 8.40 5* 9.70 6 25.00 *= imported articles Annual Demand 6,400 2,200 4,500 3,500 6,000 4,800 =WD*6 Time per order (minutes) Domestic Imported 20....... 20/60*3= $1 24 20 20 Person involved Secretary Inventory manager Reception Registration Owner Hourly wage ($) 3.00 3.20 4.50 4.20 20.00 30 30 20 20 20 60 SKU Unit cost Weekly Demand Actual Q =6400/52 =WD*3 1 15.78 2* 40.50 3* 18.30 4 8.40 5* 9.70 6 25.00 *= imported articles Annual Demand 6,400 2,200 4,500 3,500 6,000 4,800 =WD*6 Time per order (minutes) Domestic Imported 20....... 20/60*3= $1 24 20 20 Person involved Secretary Inventory manager Reception Registration Owner Hourly wage ($) 3.00 3.20 4.50 4.20 20.00 30 30 20 20 20 60