Name: 
 

CHAPTER 16: CURRENT ASSET MANAGEMENT


Short Answer
 
 
Rocky Mountain Bikes assembles mountain bikes for businesses throughout Western Canada.  The company’s main supply requirements are tires, bike frame, and handlebars.  Rocky Mountain’s customers purchase 3400 bikes annually in regular intervals. 

 
Tires
Frame
Handlebar
Supplier
Terry’s Tire
Famous Frames
Get a Grip Inc.
Order costs
$25
$100
$30
Carrying costs
15%
35%
17%
Wholesale cost
$12.50
$63.25
$21.80
Lead Time
0 days
0 days
0 days
 

 1. 
Determine the quantity that provides the lowest total costs for each item (remember, each bike requires TWO tires).
 

 2. 
Calculate the optimal inventory cycle for each item.
 

 3. 
What is the annual inventory costs and ordering costs for Rocky Mountain Bikes?
 



 
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