Scenario 9.1 The Talbot Company Uses Electrical Assemblies to Produce an Array

Scenario 9.1
The Talbot Company uses electrical assemblies to produce an array of small appliances.One of its high cost / high volume assemblies,the XO-01,has an estimated annual demand of 8,000 units.Talbot estimates the cost to place an order is $50,and the holding cost for each assembly is $20 per year.The company operates 250 days per year.
-Use the information in Scenario 9.1.The purchasing manager decides that,in order to save purchasing time,orders for the XO-01 will be placed every three months,or four times per year.How much does this approach cost Talbot in total annual holding and ordering costs (instead of Talbot ordering using the EOQ quantity) ?

A) greater than $18,000
B) greater than $14,000 but less than or equal to $18,000
C) greater than $10,000 but less than or equal to $14,000
D) less than or equal to $10,000

Correct Answer:

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