Essay About Volume  X  Pilferage Rate  X And Total Annual Cost Of Plan A

Logistics and Transportation
Patrick BernardoLogistics and TransportationProf FrazeeWednesday 6:30-9:20Problem Set #2 HW6 November 12, 2014#19 and 2119.  Cost of going rate of pilferage (with no added security):Cost  =  volume  x  pilferage rate  x  lost revenue/bottle = 9,600,000 volume  x  .004  x  $4.50/bottle  =          $172,800(Plan A )-Added cost:   Wages and benefits: $14.50/hr.  x  24 hrs/day  x  365 days  +  4 ($2,000)   =  $135,020Product still pilfered: 9,600,000 volume  x  .002  x  $4.50/bottle        =  86,400                        Total Annual Cost of Plan A:   $221,420                                                (Plan B )-Added cost:Wages and benefits:Specialist’s salary and benefits:        =  $ 49,000Equipment:    $120,000  +  $8,000  +  (4800/mo. X 12 mos) =  25,600         8 yearsProduct still pilfered:9,600,000 volume  x  .001  x  $4.50/bottle =   43,200        Total Annual Cost of Plan B:     $117,800(Plan C)-Added cost:Wages and benefits:$12/hr.  x  24 hrs/day  x  365 days  +  4 ($1,000)  =  $109,120Equipment: (6  x  $1,200)  +  $36,000   =         3,600            12 yearsProduct still pilfered:    9,600,000 volume  x  .0005  x  $4.50/bottle =   21,600        Total Annual Cost of Plan C:                                                $134,320Plan B (barcode technology) offers the lowest combination of added investment and remaining product pilferage ($117,800). Video surveillance (Plan C) offers the next cheapest  ($134,320) still better than $172,800 expected loss associated with no action. Hiring four security guards (Plan A) represents the most expensive plan costing $221,420.