M. P. VanOyen Manufacturing has gone out on bid for a regulator component. Expec
ID: 331948 • Letter: M
Question
M. P. VanOyen Manufacturing has gone out on bid for a regulator component. Expected demand is
700 units per month. The item can be purchased from either Allen Manufacturing or Baker Manufacturing. Their price lists are shown in the table. Ordering cost is $50 and annual holding cost per unit is $6.
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Allen Mfg.
Baker Mfg.
Quantity
Unit Price
Quantity
Unit Price
?1-499
?$16.00??
?1-399
?$16.10??
?500-999
15.50
?400-799
15.60
?1000+
15.00
?800+
15.10
?c) What is the optimal order quantity and total annual cost of? ordering, purchasing, and holding the? component?
The optimal order quantity is BLANK with a total cost of $ BLANK
?(round your responses to the nearest whole? number).
Allen Mfg.
Baker Mfg.
Quantity
Unit Price
Quantity
Unit Price
?1-499
?$16.00??
?1-399
?$16.10??
?500-999
15.50
?400-799
15.60
?1000+
15.00
?800+
15.10
Explanation / Answer
c- Optimal order quantity= ?(2*700*12*50/6)= ?140,000= 374
Annual ordering cost=(700*12/374)*50=22.46*50=$1123
Annual holding cost= 374/2*6=$1122
Annual Purchasing cost= 700*12*16=$134,400
Total cost= $1123+$1122+$134,400=$136,645
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