According to the Financial Department, the cost for a short waiting of a customer is $20. When there are: backorder, lost sales, lost customer, the costs are: $40, S100, $600 respectively. Y Figures calculated by the Marketing Department for the last year show the following: 1. 20% of all stock-outs result in short waiting of a customer. 2. 50% of all stock-outs result in a back order. 3. 20% of all stock-outs result in a lost order. 4. 10% of all stock-outs result in a lose of a customer. Questions: a. What is the average cost of a stock-out? b. How much should we invest in inventory to reduce the number of stock-outs from 1000 a year to only 200 per year?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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According to the Financial Department, the cost for a short waiting of a customer is $20. When there are:
backorder, lost sales, lost customer, the costs are: $40, $100, S600 respectively.
Y
Figures calculated by the Marketing Department for the last year show the following:
1. 20% of all stock-outs result in short waiting of a customer.
2. 50% of all stock-outs result in a back order.
3. 20% of all stock-outs result in a lost order.
4. 10% of all stock-outs result in a lose of a customer.
Questions:
a. What is the average cost of a stock-out?
b. How much should we invest in inventory to reduce the number of stock-outs from 1000 a year to only
200 per year?
Transcribed Image Text:According to the Financial Department, the cost for a short waiting of a customer is $20. When there are: backorder, lost sales, lost customer, the costs are: $40, $100, S600 respectively. Y Figures calculated by the Marketing Department for the last year show the following: 1. 20% of all stock-outs result in short waiting of a customer. 2. 50% of all stock-outs result in a back order. 3. 20% of all stock-outs result in a lost order. 4. 10% of all stock-outs result in a lose of a customer. Questions: a. What is the average cost of a stock-out? b. How much should we invest in inventory to reduce the number of stock-outs from 1000 a year to only 200 per year?
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