Solution Library

Inventory in Cost Accounting - Problem

Question:

Consider the following data pertaining to a distribution center.

Parameter

Value

Mean Weekly Demand

100

Standard Deviation  of Weekly Demand

30

Lead Time

2 Weeks

# of weeks in year

50

Ordering cost:                         $50 /order

Holding cost:                          $4 /unit /week.

Cycle service level:                 97% 

Measure

Computation

 

 

order quantity

 

 

 

 

 

cycle inventory

 

 

 

 

 

safety inventory

 

 

 

 

 

reorder level

 

 

 

 

 

annual inventory holding cost

 

 

 

 

 

number of orders per year

 

 

 

 

 

annual ordering cost

 

 

 

Summary:

The question is related to cost accounting in finance. It deals with measures such as Order Quantity, Cycle Inventory, Safety Inventory, Reorder Level, Annual Inventory Holding, Annual Ordering Cost, etc. All these measures are calculated according to given cost and time.

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