Question
A component arrives gradually and at the rate of 20 units per week and is used with the rate of 5 units per week. The
- A component arrives gradually and at the rate of 20 units per week and is used with the rate of 5 units per week. The item costs $2,000 per unit. The cost per order is $10,000 and the annual holding cost is .25 percent of the unit cost.
a) Which inventory model should be used: EOQ (Economic Order Quantity) model or POQ (Production Order Quantity) model? Why?
b) What is the optimal order quantity?
c) What is the optimal annual ordering cost?
d) What is the optimal annual holding cost?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Inventory Model Selection and Analysis a Inventory Model The appropriate model for this scenario is the Economic Order Quantity EOQ model Heres why EO...
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Step: 3
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Cost Accounting A Managerial Emphasis
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
6th Canadian edition
978-0132893534, 9780133389401, 132893533, 133389405, 978-0133392883
