Question: A firm wishes to minimize annual inventory costs. The firm uses the EOQ model to determine the cost-minimizing order quantity and the reorder point. Annual

A firm wishes to minimize annual inventory costs. The firm uses the EOQ model to determine the cost-minimizing order quantity and the reorder point.

Annual demand, units	22,100
Item cost, $ per unit	3.2
Ordering cost, $ per unit	12
Holding cost, annual rate	0.10
Operating days per year	365
Lead time, days	6

The firm will receive a 20 percent reduction in the cost of the item (lowered to $3.20 per unit) if the order quantity is at least 2,000 units. Should the firm accept the offer?

1) What is the annual inventory cost? (Round your answer to 2 decimal places).

2) What is the reorder point? (Round your answer to 2 decimal places).

3) Comparing your answer to Problem 1, should the firm accept the offer?

Step by Step Solution

★★★★★

3.93 Rating (375 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Thank you Lep D Annual on yearly clemand C cost of one uni... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Mathematics Questions!

Cheadle Company purchased a fleet of 20 delivery trucks for $8,000 each on January 2, 2019. It decided to use composite depreciation on a straight-line basis and calculated the depreciation from the...

The preparation of financial statements in accordance with AASB standards is one of the most important government regulations imposed on many companies in Australia. According to Australian...

Some computer output for an analysis of variance test to compare means is given. (a) How many groups are there? (b) State the null and alternative hypotheses. (c) What is the p-value? (d) Give the...

Tech Works Corp. produces J-Pods, music players that can download thousands of songs. Tech Works forecasts that demand in 2014 will be 48,000 J-Pods. The variable production cost of each J-Pod is $...

MacroHard Corp. produces J-Pods, music players that can download thousands of songs. MacroHard forecasts that demand in 2013 will be 48,000 J-Pods. The variable production cost of each J-Pod is $50....

Thomas Peterson, general manager for Topp Desk Company, is exasperated because the company exhausted its finished goods inventory of Style 103-Modern Desk twice during the previous month. This led to...

Andria Mullins, financial manager of Webster Electronics, has been asked by the firm's CEO, Fred Weygandt, to evaluate the company's inventory control techniques and to lead a discussion of the...

Tech Works Corp. produces J-Pods, music players that can download thousands of songs. Tech Works forecasts that demand in 2017 will be 48,000 J-Pods. The variable production cost of each J-Pod is...

Tech Works Corp. produces J-Pods, music players that can download thousands of songs. Tech Works forecasts that demand in 2013 will be 48,000 J-Pods. The variable production cost of each J-Pod is...

EOQ, uncertainty, safety stock, reorder point. Chadwick Shoe Co. produces and sells an excellent quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country....

Identify the degree of each polynomial. a. x3 + 9x2 + 26x + 24 b. 7x2 - 5x c. x7 + 3x6 - 5x5 + 24x4 + 17x3 - 6x2 + 2x + 40 d. 16 - 5x2 + 9x5 + 36x3 + 44x

You are planning on acquiring a machine for a business that you have just started. The machine costs $35,000 and you can get a 5-year term loan at 10%; at the end of the five years, the machine is...

Occurs when high risk individuals have more information on their health status than the insurer and are able to buy insurance at a premium based on a lower risk group: Group of answer choices Joint...

Allegheny Mountain Power and Light is an electric utility company with a large fleet of vehicles including automobiles, light trucks, and construction equipment. The company is evaluating four...

As the accountant for Riley's Natural Food Store, (1) Journalize the following transactions into the general journal (p. 2), (2) Record and post as appropriate, and (3) Prepare a schedule of accounts...

Given in the following table are the tasks necessary for the assembly of Fine Cedar Chests, the length of time needed to perform each task, and the operations that must be completed prior to...

If yields on Treasury securities were currently as follows: a. Plot the yield curve. b. Explain this yield curve using the unbiased expectations theory and the liquidity preference theory. TERM YIELD...

ACME Manufacturing is considering replacing an existing production line with a new line that has a greater output capacity and operates with less labor than the existing line. The new line would cost...

What is the approximate number of known species? Multiple choice question. over 100 million around 2 million around 8.7 millions species

Question content area top Part 1 Breakeven cash inflows and risk Blair Gases and Chemicals is a supplier of highly purified gases to semiconductor manufacturers. A large chip producer has asked Blair...

Coefficient of variation Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of...

I INFO UPDATED!! Coefficient of variation Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered...

1 Data Table -X in order to copy the contents of the data table below (Click on the icon here into a spreadsheet.) Alternative A B Expected return 21% 24% 17% 16% Standard deviation of return 7.6%...

Coefficient of variation Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each of...

12. Coefficient of variation Metal Manufacturing has isolated four alternatives for meeting its need for increased production capacity. The following table summarizes data gathered relative to each...