ETS manufactures a component for its computer products. The annual demand for this component is 2500 units. The annual cost of maintaining inventory is 10% per unit and the cost of preparing an order and setting up production for the order is $ 50. The machine used to make this part has a production rate of 10,000 units per year and the cost is $ 22 per unit. a. Find the EPQ(Economic Production Quantity) A. How long does it take to produce the batch? B. How many batches will be produced per year?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

Section: Chapter Questions

Problem 24P: Lander Parts, Inc., produces various automobile parts. In one plant, Lander has a manufacturing cell...

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Question

ETS manufactures a component for its computer products. The annual demand for this
component is 2500 units. The annual cost of maintaining inventory is
10% per unit and the cost of preparing an order and setting up production
for the order is $ 50.
The machine used to make this part has a production rate of 10,000
units per year and the cost is $ 22 per unit.
a. Find the EPQ(Economic Production Quantity)
A. How long does it take to produce the batch?
B. How many batches will be produced per year?
C. What is the maximum inventory level?
D. What is the total cost per year?
E. A supplier offers to sell a similar component for $ 25 per unit with a charge
$ 5 per service per order. Should the company accept the offer?
F. Find the average inventory level for each situation

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