Question

A manufacturer has a production facility that requires 14,813 units of component JY21 per year. Following a long-term contract, the manufacturer purchases component Jy 21 from a supplier with a lead time of 6 days. The unit purchase cost is $31.7 per unit h place and process an order from the supplier is $137 per order. The unit in cost per year is 12.5 percent of the unit purchase cost. The manufacturers days a year. Assume EOQ model is appropriate. If the manufacturer uses a opet cler quantity of 1,011 units per order, what is the annual inventory cost?

Answer 1

To calculate the annual inventory cost for component JY21, we determine the annual holding cost and annual ordering cost using the EOQ model and provided data, including a holding cost rate of 12.5% of the purchase cost and an order quantity of 1,011 units.

Step-by-step explanation:

The student is asking for help in calculating the annual inventory cost using the Economic Order Quantity (EOQ) model, given a specific order quantity for component JY21. The required information to solve this includes the annual demand, ordering cost, holding cost rate, and the cost per unit.

To calculate the annual inventory cost, we use the formula which comprises the annual holding cost and the annual ordering cost. The annual holding cost is computed by multiplying the average inventory level by the holding cost per unit per year. The average inventory level is half the order quantity when using EOQ. The holding cost per unit per year is 12.5% of the unit purchase cost according to the information provided. Therefore, the annual holding cost is (1,011 units / 2) * (12.5% of $31.7).

The annual ordering cost is found by dividing the annual demand by the order quantity and then multiplying by the cost per order. So, it is (14,813 units / 1,011 units per order) * $137 per order.

Summing these two costs gives us the total annual inventory cost, which is the answer the student is seeking.