What is a Capital Gain on an investment?
1 answer:
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Complete question:
Videoworld is a discount store that sells color televisions. The monthly demand for color television sets is 100. The cost per order from the manufacturer is $600. The carrying cost is $64 per set each year. Assume a year has 360 working days. Determine the following values rounding to the nearest integer (answer them using only numbers without any sign such as the dollar sign, comma, ...):
Q1. The optimal quantity per order: Q2. The minimum total annual inventory costs:
Q3. The optimal number of orders per year:
Q4. The optimal time between orders (in working days):
If the store had an inventory policy that allows shortages with the shortage cost per set estimated at $80, determine the following values:
5) The optimal quantity per order when the store allows shortages
6) The optimal storage level when the store allows shortages
7) The optimal number of orders when the store allows shortages
8)The optimal time between orders (in working days) when the store allows shortages.
Answer:
1) 150
2) $4,800
3) 8
4) 45 days
5) 201
6) 89
7) 6
8) 60 days
Explanation:
We are given:
Monthly demand, = 100
Cost per order, S= $600
Carrying cost, H = $64 per set/ year
Shortage cost, Cs = $80
Yearly demand will be, D= 100*12 =1200
1) The optimal quantity per order:
2) The minimum total annual inventory cost:
Average inventory * H
Where average inventory = Q*/2
Therefore,
Average inventory * H
= 75 * 64
= $4,800
3)The optimal number of orders per year:
4) The optimal time between orders:
5)The optimal quantity per order when the store allows shortages:
= 201.25 ≈ 201
6) The optimal shortage level when the store allows shortages:
= 89.33 ≈ 89
The optimal shortage level when the store allows shortages = 89
7) The optimal number of orders per year when the store allows shortages:
No. of orders =
= 5.97 ≈ 6
Optimal number of orders per year = 6
8) The optimal time between orders (in working days) when the store allows shortages:
Time between orders = Number of working days/ Number of orders
The optimal time between orders (in working days) = 60 Days
Answer:
a) 4.800 units: Operational loss area (L)
12,000: Break even point (BEP)
$1,500,000: BEP
20,000 units: Operational profit area (P). Also, the maximum amount of units.
$2,500,000: Operational profit area (P). Also, the maximum amount of sales.
b) BEP: 12,000 units or $1,500,000 in sales.
Explanation:
The graph is divided in two sections:
1 - The operational loss area (L)
2 - The operational profit area (P)
The interface between both regions is the breakeven point.
a) 4.800 units: Operational loss area (L)
12,000: Break even point (BEP)
$1,500,000: BEP
20,000 units: Operational profit area (P). Also, the maximum amount of units.
$2,500,000: Operational profit area (P). Also, the maximum amount of sales.
b) The breakeven point is where sales equal total cost (or the level at which profits are zero). This breakeven point (BEP) is at 12,000 units:
This corresponds to $1,500,000 in sales.
