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Homework answers / question archive / The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "Big Bucks" automated teller machine, which only dispenses $100 bills
The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "Big Bucks" automated teller machine, which only dispenses $100 bills. She estimates that this machine dispenses an average of 12,500 bills per month, and that carrying a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days. Assuming a 30-day month, if she were to order 6,000 bills at a time, what would be the dollar value of the average inventory level?
We are given,
Order quantity = 6,000 bills
Average inventory level = order quantity/2
= 6,000 bills /2
= 3,000 bills
Value of one bill = $100
Dollar value of average inventory level
= $100*3,000 bills
= $300,000