Jones Manufacturing Inc. purchases a component from a Chilean supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20 percent. The company's order cost is $30.00. If the company decides to order 1,750 units each time it places an order, what will be the total annual cost of this policy? (Do not include the product cost in your answer.)

$2750

Explanation:

Given that:

Demand for the component = 70 units each day.

Opening days in a year = 250

Reorder time rate = 10 dyas

Cost of product = $14.00

Carrying cost = 20% = 0.2

Order cost = $30.00

So if the company decides to order 1,750 units each time it places an order, the objective of this question is to find the total annual cost of this policy.

The total annual cost = total inventory cost + total ordering cost

where:

Total inventory cost  = (ordering quantity/2)*unit holding cost

Total inventory cost  = (1750/2) × (0.2 × 14)

Total inventory cost  = 2450

Total ordering cost = (annual demand/ordering quantity) × ordering cost

Total ordering cost =  (70 × 250/1750) × 30

Total ordering cost = ( 70 × 0.1428571429) × 30

Total ordering cost ≅ 300

Total annual cost = 2450 + 300

Total annual cost = $2750

support your answer using the data presented. (5 points). 4. based on the information you used to schedule and curve, which product would you recommend the shoe hut focus on, and why? provide details that support your answer. (5 points).

answer production department;