The XYZ Company purchases a component used in the production of automobile generators from an external supplier. It currently places orders for the component every two months. XYZ's generator production process uses 4,000 components monthly. Assume ordering costs are $20 per order, unit cost is $1.25 per component, and annual inventory holding costs are assessed at 20 percent of unit cost. The company operates 250 days per year, and the lead time from the component supplier is five days. A. The economic order quantity (EOQ) for this component is approximately:
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
The XYZ Company purchases a component used in the production of automobile generators from an external supplier. It currently places orders for the component every two months. XYZ's generator production process uses 4,000 components monthly. Assume ordering costs are $20 per order, unit cost is $1.25 per component, and annual inventory holding costs are assessed at 20 percent of unit cost. The company operates 250 days per year, and the lead time from the component supplier is five days.
A. The economic order quantity (EOQ) for this component is approximately:
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