Cycle Inventory: It may be best to set up spreadsheets to compute answers to the problems below. Show your work. In all problems assume that the annual holding cost is 15% of product cost (h=0.15).
1. Motor Company purchases components from three suppliers: Components from supplier Alpha cost $20 and are used at the rate of 300 units/month; components from supplier Beta cost $12 and are used at the rate of 1,000 units/month; components from supplier Gamma cost $30 and are used at the rate of 700 units/month. The trucking company is charging a fixed cost of $1,000/truck (for this exercise assume you do not need to worry about the truck capacity). Currently they purchase separate truckloads from each supplier. What is the corresponding minimal annual cost? What is the cycle inventory of each component? Show your work.
Answers
Answer:
Explanation:
Total operating expenses in trucking (excluding very specialized operating models), range from extremes of $1.16 to $3.05 per mile when you simply take the best and worst from each of the categories below. Realistically, no trucking company could achieve an average total operating cost per total mile of $1.16, nor would they survive at $3.05 per mile. However, this article will illustrate the wide variances, and opportunity costs that operators realize on a day-to-day basis.
Expense Category Low Range High Range
Driver Compensation $0.48 per Mile $0.83 per Mile
Fuel $0.40 per Mile $0.55 per Mile
Equipment Financing $0.00 per Mile $0.40 per Mile
Maintenance $0.09 per Mile $0.40 per Mile
Insurance $0.06 per Mile $0.18 per Mile
Variable Driving Expenses $0.01 per Mile $0.09 per Mile
Non-Driver Compensation $0.06 per Mile $0.30 per Mile
Fixed Overhead $0.06 per Mile $0.30 per Mile