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…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter23: Other Topics In Working Capital Management

Section: Chapter Questions

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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.

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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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