Question 9.4 Sweet Tunes Ltd. makes musical instruments. One of their products is a ukulele that has an annual demand of 3,000 units. The setup cost for each production batch is $900; it costs $15 to carry a ukulele in inventory for one year. RequiredWhat is the total annual relevant batch set up and carrying cost if the company uses the economic order quantity? Assume that setup costs are the same as ordering costs.The company is switching to a just-in-time system. The average order size is 200 ukuleles. What is the total annual relevant batch set up and caring cost?Compare the Enterprise Resource Planning EOQ model with the JIT model. What are the advantages and disadvantages of each?

1. To determine the economic order quantity (EOQ), we can use the formula:EOQ = sqrt((2DS)/H)where:…

Answered: Question 9.4…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Question 9.4

Sweet Tunes Ltd. makes musical instruments. One of their products is a ukulele that has an annual demand of 3,000 units. The setup cost for each production batch is $900; it costs $15 to carry a ukulele in inventory for one year.

Required

What is the total annual relevant batch set up and carrying cost if the company uses the economic order quantity? Assume that setup costs are the same as ordering costs.
The company is switching to a just-in-time system. The average order size is 200 ukuleles. What is the total annual relevant batch set up and caring cost?

Compare the Enterprise Resource Planning EOQ model with the JIT model. What are the advantages and disadvantages of each?

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