Question: 1. What are the elements of an inventory policy?
2. How does reducing the Inventory Conversion Period shorten the Cash Conversion Cycle?
3. Discuss reasons for holding inventory.
4. Discuss the five types of inventory.
5. Discuss the financial impact of carrying excess inventory.
6. What is the difference between just-in-time inventory (JIT), supplier-managed replenishment programs, and paid-on-production inventory process?
7. Your CFO has asked you to report on the differences between Obsolescence inventory and Spoilage. Be sure to include in your answer how each is tracked and disposed of.
8. What are the benefits of holding inventory?
9. Discuss the costs associated with holding inventory.
Problems: ABC, Inc. manufactures 500 drones per month. The company purchases composite materials from a supplier at the cost of $200 per unit. Four units of composite materials are used in each drone. The company's inventory carrying cost is estimated to be 15% of the cost and the ordering cost is 150 per order.
a. Calculate the EOQ
b. What is the number of orders per year?
c. Compute the average annual ordering cost.
d. Compute the average inventory.
e. Compute the average annual carrying cost?
f. Compute the total cost