Question

# McCartney Company produces a number of products and provides the following information: Annual demand for Product...

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.

 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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