question 3 section A I can\'t figure out please explain step by step 3 The ABC C
ID: 454195 • Letter: Q
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question 3 section A
I can't figure out please explain step by step
3 The ABC Company (Exasple 7.5) has identified another potencial supplier foe the molded plastic parts. The new suppler has bid $0.08 per part but also will impose a ship- 0x per um ventory handling charges should amount to SOi007 per unit Finally, purchasing costs are estimated at $25 per month for the length of the 36-month contract. a. (") Calculate the total costs for the new supplier. Which What is its ntory were retas profit ow much enerate in is cheaper: insourcing or outsourcing with the new supplier? b. (..) Suppose the three-year volume is expected to tise to 1.5 million, rather than I million, molded plastic parts. Recalculate the total costs associated with in- sourcing. What explains the difference? nings as a (") w c.What other factors, other than costs, should ABC consider when deciding whether to make the moldesd parts in-house?Explanation / Answer
The Annual Demand D= 1500000
The Cost of Shipping Co= 0.08
The Cost of Holding Ch= 0.015
The Economic Order Quantity = Square root (2*D*Co/Ch) = Square root (2*1500000*0.08/0.015) =60 Units
Each time , the firm has to purchase = 60 units.
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