Question

McCartney Company produces a number of products and provides the following information:

Annual demand for Product C | 20,000 |

Cost of setting up to make Product C | $45 |

Cost of carrying one unit of Product C in inventory | $5 |

Currently, McCartney produces 1,000 units of Product C per production run.

Inventory-related cost for Product C under the current inventory policy is

a.$900.

b.$2,500.

c.$3,400.

d.$45,000.

e.$100,000.

The economic order quantity (EOQ) for Product C is

a.500.

b.600.

c.700.

d.800.

What is the total inventory-related cost at the EOQ?

(*Note:* Round the number of setups to the nearest whole
number.)

a.$1,500

b.$3,330

c.$2,985

d.$3,400

e.$5,000

e.1,000.

Answer #1

Q1. | ||||

Answer is c. 3400 | ||||

Explanation: | ||||

Setting up cost =20000/1000 *45 = 900 | ||||

Carrying cost =1000/2* 5=2500 | ||||

Total Inventory cost =900+2500 = 3400 | ||||

Q2. | ||||

Answer is b. 600 | ||||

Explanation: | ||||

Annual demand =20000 | ||||

Setting up = 45 per setup | ||||

Carrying cst = 5 per unit | ||||

EOQ = (2*20000*45/5)^2= 600 | ||||

Q3. | ||||

Answer is c. 2985 | ||||

Explanation: | ||||

Setting up cost =20000/600 =33 setup= 33*45 = 1485 | ||||

Carrying cost = 600/2*5=1500 | ||||

Total invenntory cost = 1485+1500=2985 |

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Unit
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$
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22
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