The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year. The purchasing manager decides that, in order to save purchasing time, orders for the XO-01 will be placed every three months, or four times per year. How much does this approach cost Talbot in total annual holding and ordering costs (instead of Talbot ordering using the EOQ quantity)?

The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year. The purchasing manager decides that, in order to save purchasing time, orders for the XO-01 will be placed every three months, or four times per year. How much does this approach cost Talbot in total annual holding and ordering costs (instead of Talbot ordering using the EOQ quantity)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost
/ high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the
cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company
operates 250 days per year.
The purchasing manager decides that, in order to save purchasing time, orders for the XO-01 will be placed
every three months, or four times per year. How much does this approach cost Talbot in total annual
holding and ordering costs (instead of Talbot ordering using the EOQ quantity)?

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