Q&A Hero

Question

What is the total annual cost of maintaining the components inventory under the present system?
Current system

Item		 Average distance from vendor (in miles)
Number of units used each week
Current lot size purchased
Unit cost
Average freight cost per unit
Gas range 1,145 10 200 $100 $20
Toilet 606 10 240 $80 $18
Pump 26 56 125 $16 $3
Refrigerator (large) 22 6 120 $110 $20
Refrigerator (small) 22 7 15 $95 $15
Foam cushion 490 675 1,500 $8 $2
CB radio (type D) 1,800 9 24 $136 $11
Dome lights 3 824 1,720 $2 None
Awning bracket 48 540 1,200 $4 $1
Insect screen 159 570 1,240 $7 $1

Current system (continued)

Item
Safety stock
Average inventory
Total inventory
Inventory cost		 Inventory carrying charges Inventory maintenance cost
Gas range 40 100 140 $62,400 $3,360 $65,760
Toilet 40 120 160 $50,960 $3,136 $54,096
Pump 56 63 119 $55,328 $450 $55,778
Refrigerator (large) 6 60 66 $40,560 $1,716 $42,276
Refrigerator (small) 7 8 15 $40,040 $319 $40,359
Foam cushion 1,350 750 2,100 $351,000 $4,200 $355,200
CB radio (type D) 36 12 48 $68,796 $1,411 $70,207
Dome lights 824 860 1,684 $85,696 $674 $86,370
Awning bracket 540 600 1,140 $140,400 $1,140 $141,540
Insect screen 1,140 620 1,760 $237,120 $2,816 $239,936

Answer

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