=+17-27 KK MRP, EOQ, JIT OBJECTIVE 5 DiamondSoft Ltd produces a number of different electronic devices including earbuds, music players and earbuds combined in a device that fits directly into the ear. DiamondSoft forecasts that demand in 2015 will be 174000 earbuds. The variable production cost of each earbud is $35. Due to the large $95000 cost per set-up, DiamondSoft plans to produce earbuds once a month in batches of 14500 each. The carrying cost of a unit in inventory is $15.75 per year.

686 Chapter 17: Inventory management, just-in-time and simplified costing methods M17_HORN3377_02_LT_C17.indd 686 2/09/13 4:00 PM Required 1 Using an MRP system, what is the annual cost of producing and carrying earbuds in inventory? (Assume that, on average, half of the units produced in a month are in inventory.)