Introduction:
A variety of criteria and techniques can be used to determine how many
units of a product to purchase or produce and what parameters to set for
inventory management. In this task, apply the economic order quantity
model and the economic production lot model to related decisions.
Given:
Company A’s demand is uniform throughout the year and totals 18,000
units per year. Ordering costs total $38 per order. The annual holding
cost rate is 26% of the value of the inventory. The per-unit cost of
inventory is $12.
Company B’s demand is uniform throughout the year and totals 15,000
units per year. The production setup costs total $84 per setup. The
annual holding cost rate is 28% of the value of the inventory. The
per-unit cost of finished product is $19. The production rate is
constant and equivalent to 60,000 units per year.
Task:
Write a brief response in which you:
A. Determine the order size for Company A in the given scenario that
would minimize total annual cost by using the economic order quantity
model, showing all of your work.
B. Determine the lot size for Company B in the given scenario that would
minimize total annual cost by using the economic production lot size
model, showing all of your work.
C. When you use sources, include all in-text citations and references in APA format.
Note: To reduce unnecessary matches select ignore “small matches <20 words” and “bibliography”.
Note: For definitions of terms commonly used in the rubric, see the attached Rubric Terms.
Note: When using sources to support ideas and elements in a paper or
project, the submission MUST include APA formatted in-text citations
with a corresponding reference list for any direct quotes or
paraphrasing. It is not necessary to list sources that were consulted if
they have not been quoted or paraphrased in the text of the paper or
project.
Note: No more than a combined total of 30% of a submission can
be directly quoted or closely paraphrased from sources, even if cited
correctly. For tips on using APA style, please refer to the APA Handout
web link included in the General Instructions section.
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