Just-In-Time Practice System Supply Current Stockless Item Start-up cost Annual stock-holding cost Annual operating cost $0 $2.5 $5 $3 $1.4 $0.2 $2 $1.5 $1.2 System life 8 years 8 years 8 years
Just-In-Time Practice System Supply Current Stockless Item Start-up cost Annual stock-holding cost Annual operating cost $0 $2.5 $5 $3 $1.4 $0.2 $2 $1.5 $1.2 System life 8 years 8 years 8 years
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Fulton National Hospital is reviewing ways of cutting the costs for stocking medical supplies. Two new stockless systems are being considered to lower the hospital's holding and handling costs. The hospital's industrial engineer has compiled the relevant financial data for each system, as follows, where dollar values are in millions:
The system life of eight years represents the contract period with the medical
suppliers. If the hospital's MARR is 10%, which system is more economical?
Transcribed Image Text:Just-In-Time
Practice System Supply
Current
Stockless
Item
Start-up cost
Annual stock-holding cost
Annual operating cost
$0
$2.5
$5
$3
$1.4
$0.2
$2
$1.5
$1.2
System life
8 years
8 years
8 years
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