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Sally Kanina is truly a hands' off owner of Awesome Cakes. She trusts her manager, William to make the hard decisions that keep the business

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Sally Kanina is truly a hands' off owner of Awesome Cakes. She trusts her manager, William to make the hard decisions that keep the business operating efficiently and effectively. So far things have been going really well and she has been pleased with the profitability of the company. One day Sally decided to do some reading and research, thinking it was time to add some of her magic to the company that she had founded to help take it to the next level of Awesomeness. She read about inventory management, lean, market expansion, you name it she read about it. The problem was that she didn't read very deeply and thought that she could just go talk to William and get him to make lots of changes in how the company operated. Your job is to help William respond to Sally's great ideas and surprising interest. As part of her new found interest in Lean, Sally has asked for an investigation into the current inventory management practices of the company. She thinks that Lean is about reducing inventory to zero. William wants to show Sally some of the calculations the Inventory team does and how they use them for decision making. He's been thinking about having the icing made by another company and shipping it in. He thinks there may be cost savings that result from doing so. ..Ordering Analysis (12 marks) William has researched alternative icing suppliers and the data provided below would be valid if Awesome agrees to a one-year contract with the supplier. William has estimated that their relevant holding costs are 40% per annum, since the icing must be kept refrigerated or frozen. The production department is confident that daily is around 25 units with a standard deviation of 10 per day. Uncertainty exists however on the delivery lead time from the suppliers. Assume a 365-day year. Supplier Location St. John's, Halifax, Montreal, Toronto Regina, SK NF Q Unit Cost $49.00 $42.00 S43.00 Order Process Automated Manual Manual Manual Order Costs $20.00 $175.00 $150.00 $250.00 Primary Method of Truck & Truck Rail Transport Ship & Rail Rail Truck & Rail Normal Lead Time (days) 4 3 20 16 7 Lead Time Variation -1 to +3 -1 to +2 -3 to +15 (days) -4 to +12 -2 to 4 For each alternative, calculate the following: (9 marks) a. Economic Order Quantity b. Reorder Point c. Average Inventory Level d. Inventory turns per year e. Total Annual Cost NS $44.00 $47.50 Semi- Automated $45.00 Note: Do not round calculated values. For formatting purposes, display two decimals. Include your formulas used - in Microsoft Excel, Press CTRL + ' (grave accent). Activate the printing of the row and column headings" in page setup. Sally Kanina is truly a hands' off owner of Awesome Cakes. She trusts her manager, William to make the hard decisions that keep the business operating efficiently and effectively. So far things have been going really well and she has been pleased with the profitability of the company. One day Sally decided to do some reading and research, thinking it was time to add some of her magic to the company that she had founded to help take it to the next level of Awesomeness. She read about inventory management, lean, market expansion, you name it she read about it. The problem was that she didn't read very deeply and thought that she could just go talk to William and get him to make lots of changes in how the company operated. Your job is to help William respond to Sally's great ideas and surprising interest. As part of her new found interest in Lean, Sally has asked for an investigation into the current inventory management practices of the company. She thinks that Lean is about reducing inventory to zero. William wants to show Sally some of the calculations the Inventory team does and how they use them for decision making. He's been thinking about having the icing made by another company and shipping it in. He thinks there may be cost savings that result from doing so. ..Ordering Analysis (12 marks) William has researched alternative icing suppliers and the data provided below would be valid if Awesome agrees to a one-year contract with the supplier. William has estimated that their relevant holding costs are 40% per annum, since the icing must be kept refrigerated or frozen. The production department is confident that daily is around 25 units with a standard deviation of 10 per day. Uncertainty exists however on the delivery lead time from the suppliers. Assume a 365-day year. Supplier Location St. John's, Halifax, Montreal, Toronto Regina, SK NF Q Unit Cost $49.00 $42.00 S43.00 Order Process Automated Manual Manual Manual Order Costs $20.00 $175.00 $150.00 $250.00 Primary Method of Truck & Truck Rail Transport Ship & Rail Rail Truck & Rail Normal Lead Time (days) 4 3 20 16 7 Lead Time Variation -1 to +3 -1 to +2 -3 to +15 (days) -4 to +12 -2 to 4 For each alternative, calculate the following: (9 marks) a. Economic Order Quantity b. Reorder Point c. Average Inventory Level d. Inventory turns per year e. Total Annual Cost NS $44.00 $47.50 Semi- Automated $45.00 Note: Do not round calculated values. For formatting purposes, display two decimals. Include your formulas used - in Microsoft Excel, Press CTRL + ' (grave accent). Activate the printing of the row and column headings" in page setup

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