Get instant access to this case solution for only \$15

# Musictoday LLC Implementing a Periodic Review Inventory System Case Solution

Solution Id Length Case Author Case Publisher
1067 1065 Words (9 Pages) Timothy M. Laseter, Jay Ashton, Vincent Gu Darden School of Business : UV3539
This solution includes: A Word File

Music Today LLC has been serious issues with respect to ordering the right amount of inventory and after the right interval in order to not only eliminate stock-outs but also to ensure low holding cost. Figures within the EOQ column suggest the recommended amount of quantity, Music Today LLC should order every time. Since, all products are delivered within the case of 25, 50, or 100; therefore, in the third column, figures are rounded off to the nearest order-able value as per the case quantity. The fourth column suggests the number of orders, Music Today LLC should make each year of Night Train’s products. For instance, NT CD should be ordered 17 times a year with each order size of 2,600 units, or 26 cases. Similarly, NT Black Toboggan Hat must be ordered 7 times per year with each order size of 825 units. Finally, the fourth and fifth column represents the total cost for a particular product if the company decides to go forward with the Economic Order Quantity.

## Following questions are answered in this case study solution

1. Economic Order Quantity Calculation

• Variables’ Key

• Formulae

• Calculation

1. Demonstrating Difference in Total Cost Function with Change in Order Quantity

• NT CD

• NT Black Toboggan Hat

• NT Moon Buggy T-Shirt SS White

• NT farm Wheel T-Shirt

• NT Farm Wheel Rolls CD

## Case Analysis for Musictoday LLC Implementing a Periodic Review Inventory System

#### 1. Economic Order Quantity Calculation

##### Variables’ Key

C = Unit Production Cost

A = Annual Demand

Cp = Cost per Order

Ch = Annual Holding Cost of a Unit

P = Retail Price

TC = Total Cost

Q = Optimal Order Quantity

##### Formulae

Annual Holding Cost = Cost price of the product * 15%

Total cost function = (Unit Cost * Annual Demand) + ((Annual Demand * ordering cost) / EOQ) + (Holding cost * EOQ / 2)

Economic Order Quantity = SQRT ((2 * Annual Demand * Cost per order) / Cost of holding)

Number of Orders per year = Annual Demand / Economic Order Quantity

##### Calculation
 Item Number Item Description DEMAND FOR THE YEAR 2003 First Quarter Second Quarter Third Quarter Fourth Quarter NTCD06 NT CD 6139 9523 13332 15849 NTCH01TBBK NT BLACK TOBOGGAN HAT 814 1327 1857 2141 NTCT08SXWH NT MOON BUGGY T-SHIRT SS WHITE 1659 2731 3842 4704 NTCT10SXWH NT FARM WHEEL RINGER T-SHIRT SS WHITE 800 1385 1782 2051 NTCD12 NT FARM WHEEL ROLLS CD 3181 5525 7250 8478 NTCT26SXGT NT OLD SCHOOL LOGO T-SHIRT SS GRANITE 1393 2408 3568 4032

The quarterly demand for all merchandise and CDs from the Night train band is depicted in the above table.

 Annual Demand (A) Cost (\$) Retail (\$) Holding Cost (\$) CP (\$) 44843 9.18 14.95 1.377 100 6139 12.23 29.95 1.8345 100 12936 8.75 24.95 1.3125 100 6018 8.75 24.95 1.3125 100 24434 9.18 14.95 1.377 100 11401 8.75 24.95 1.3125 100

Annual demand along with cost price, selling price, ordering cost, and the annual holding cost of each product is mentioned in the above table. All the above figures have been presented in the case except the annual holding cost of the product, which has been calculated.

 Annual Demand / EOQ TC min = sqrt(2 * Ch * A * Cp) + C * A EOQ = SQRT((2*A*Cp)/Ch) Case Quantity Nearest Value for Order as per Case Quantity Number of orders per year as per EOQ Total Cost Function TC min 2552.09 100 2,600 17.25 415,173.57 415,172.96 818.10 25 825 7.44 76,580.82 76,580.77 1403.99 50 1,450 8.92 115,033.70 115,032.74 957.62 50 1,000 6.02 53,915.55 53,914.37 1883.85 100 1,900 12.86 226,898.27 226,898.18 1318.06 50 1,350 8.45 101,489.21 101,488.71

Get instant access to this case solution for only \$15

### \$25

Save \$10 on your purchase

Amount to Pay

## Calculate the Price

Approximately ~ 1 page(s)

## \$0

### Get More Out of This

Our essay writing services are the best in the world. If you are in search of a professional essay writer, place your order on our website.

## Hi there !

We are here to help. Chat with us on WhatsApp for any queries.