The XYZ Company purchases a component used in the manufacture of automobile generators directly from the supplier. XYZ's

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The Xyz Company Purchases A Component Used In The Manufacture Of Automobile Generators Directly From The Supplier Xyz S 1 (163.25 KiB) Viewed 38 times

The XYZ Company purchases a component used in the manufacture of automobile generators directly from the supplier. XYZ's generator production, which is operated at a constant rate, will require 1,200 components per month throughout the year. Assume ordering costs are $25 per order, item cost is $2.00 per component, and annual inventory-holding costs are charged at 20 percent. The company operates 250 days per year, and the lead time is five days. a. Compute the EOQ, total annual inventory-holding and ordering costs, and the reorder point. Round your answers for the EOQ and for the reorder point to the nearest whole number, and for the total annual inventory-holding and ordering costs to the nearest cent. EOQ: units Total annual inventory-holding and ordering costs: $ Reorder point: units b. Suppose XYZ's managers like the operational efficiency of ordering in quantities of 1,200 items and ordering once each month. How much more expensive would this policy be than your EOQ recommendation? Do not round intermediate calculations. Round your answer to the nearest cent. Cost increase: $ Would you recommend in favor of the 1,200-item order quantity? Explain. Assume that if the cost increase is more than $5, the difference is considered significant. Since the difference -Select- significant, the order quantity of 1,200 -Select- acceptable. What would the reorder point be if the 1,200-item quantity is/were acceptable? Do not round intermediate calculations. Round your answer to the nearest whole number. Reorder point: units