FIN427--Assignment 2--- Problem22-6

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FIN427--Corporate Finance II …

FIN427--Corporate Finance II
Assignment 2--problem22-6 from Intermediate Financial Management By Eugene F. Brigham & Louis C. Gapinsky
Fifth Edition Dryden Press, 1996

For Mr. Mahmudul Haq's class

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  • 1. FIN427 (02) Mahmudul Haq Samiya Yesmin 11304043 Assignment 2: Problem 22-6: Miami Manufacturing S= 1,000,000 units SS= 10,000 units PP= $2 TCC/gallon =CC% x PP= $0.4 LT= 10days F=$2500 (including cleaning & inspection charge $2000) a. EOQ=? EOQ= = 111803 units b. Average value of Inventory= = = $131803 c. N= No. Of orders per year= S/Q = (1000000/111803)= 8.94 ≈9 times Total Carrying Cost= CC%*PP*(Q/2)= 0.4*(111803/2) = $22,360.6 Total Ordering Cost= F*N= 2500*8.94= $223500 Total Safety-Stock Cost= CC%*PP*SS= 0.4*10000= $4000 Total Inventory cost= TCC + TOC + TSSC= 22361+22350+4000 = $48711 d. TCC/gallon= CC%*PP 0.4= CC%*2 => CC%=0.4/2= 0.2*100= 20% e. Frequency=360/N =360/9 =40 As frequency<LT therefore GIT=0 ROP= SS + (LT*UR)-GIT ROP= 22nd Feb 2014 =37,777.78 gallons Assignment 2