Business, 25.04.2020 00:54 abby894927

Fiber Technology, Inc., manufactures glass fibers used in the communications industry. The company's materials and parts manager is currently revising the inventory policy for XL-20, one of the chemicals used in the production process. The chemical is purchased in 10-pound canisters for $110 each. The firm uses 5,400 canisters per year. The controller estimates that it costs $165 to place and receive a typical order of XL-20. The annual cost of storing XL-20 is $5.50 per canister.
Required:
1) Use the EOQ formula to determine the optimal order quantity.
2) What is the total annual cost of ordering and storing XL-20 at the economic order quantity? How many orders will be placed per year?

Fiber Technology’s controller, Jay Turnbull, recently attended a seminar on JIT purchasing. Afterward, he analyzed the cost of storing XL-20, including the costs of wasted space and inefficiency. He was shocked when he concluded that the real annual holding cost was $27.20 per canister. Turnbull then met with Doug Kaplan, Fiber Technology’s purchasing manager. Together they contacted Reno Industries, the supplier of XL-20, about a JIT purchasing arrangement. After some discussion and negotiation, Kaplan concluded that the cost of placing an order for XL-20 could be reduced to just $28. Using these new cost estimates, Turnbull computed the new EOQ for XL-20.
(a) Use the equation approach to compute the new EOQ.
(b) How many orders will be placed per year?

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Fiber Technology, Inc., manufactures glass fibers used in the communications industry. The company's...

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