Buckshot Electronics is a chain of electronics superstores that is located throughout California. They have 15 locations concentrated primarily in heavily populated areas. They sell thousands of products made by hundreds of different manufacturers. Buckshot sells everything from phones, video cameras, and video game consoles to large items like televisions. Sony is one of their larger suppliers. They offer products in nearly every category Buckshot offers to its customers. In fact, Sony sells multiple cell phone models through Buckshot. One such model is the Q9900. One of Buckshot's San Francisco stores is forecasted to sell about 7800 units of the Q9900 in the coming year. This forecasted demand is about average in terms of Buckshot's 15 other California locations. Presently they order 900 units of the 29900 every 6 weeks. Each store fills weekly orders through its Sony Distributor for items like TV's, cameras, and of course, cell phones, in addition to many other items. Orders for cell phones must be made in increments of 100 units. The distributor takes only one order per week, but Buckshot is not obligated to order every item every week. That order is then shipped 2 days later to that individual Buckshot Electronics location by truck. Buckshot's Central Procurement is looking to save money by investigating order sizes and subsequent order frequency. You are being asked to create a recommendation for order size and time between orders for the 29900 based on the numbers for this San Francisco location. Answer the questions that follow in order to create a detailed report for your supervisor Below are some the key figures important in your analysis: Q9900 Wholesale Price $ 175.00 Q9900 Retail Price $ 299.00 Annual Per Unit Holding Costs are estimated at 35% of the wholesale cost of the 29900. Costs associated with each order include: Order Placement Fees (Documentation, Network Support) $ 250.00 Delivery (Fuel, Driver, Truck, etc.) $ 125.00 Packaging $ 25.00 Receiving (Inspection, Documentation, etc.) $ 25.00 Labor (5 hours @ $10.00/hr) Stocking, Misc. $ 50.00 According to the appropriate recommendation, what would be the Total Annual Inventory cost? Also, separately identify, the annual cost of purchasing the inventory, the annual holding cost (AHC) and annual ordering cost (AOC). 25. AHC = 26. AOC = 27. TC = 28. Therefore, the total annual savings for this one store using our recommendation versus the present lot size of 900, would be: 29. Without store-by-store information it is difficult to say how much this would save the corporation. Nonetheless, using only the numbers for this store it can be said that if the numbers for the other 14 stores are similar there is a potential to save a total of about: Remember, there are 15 total stores
