a. What is the EOQ for this component?b. What is the reorder point?c. What is the cycle time?d. What are the total annual holding and ordering costs associated with your recommendedEOQ? Westside Auto purchases a component used in the manufacture of automobile generators directlyfrom the supplier. Westside's generator production operation, which is operated at a constant rate,will require 1000 components per month throughout the year (12,000 units annually).Assume that the ordering costs are $25 per order, the unit cost is $2.50 per component, and annualholding costs are 20% of the value of the inventory. Westside has 250 working days per year and alead time of 5 days.Answer the following inventory policy questions:a. What is the EOQ for this component?b. What is the reorder point?c. What is the cycle time?d. What are the total annual holding and ordering costs associated with your recommendedEOQ?

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What is the EOQ for this component? b. What is the reorder point? c. What is the cycle time?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

a. What is the EOQ for this component?
b. What is the reorder point?
c. What is the cycle time?
d. What are the total annual holding and ordering costs associated with your recommended
EOQ?

Westside Auto purchases a component used in the manufacture of automobile generators directly
from the supplier. Westside's generator production operation, which is operated at a constant rate,
will require 1000 components per month throughout the year (12,000 units annually).
Assume that the ordering costs are $25 per order, the unit cost is $2.50 per component, and annual
holding costs are 20% of the value of the inventory. Westside has 250 working days per year and a
lead time of 5 days.
Answer the following inventory policy questions:
a. What is the EOQ for this component?
b. What is the reorder point?
c. What is the cycle time?
d. What are the total annual holding and ordering costs associated with your recommended
EOQ?

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