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Quantative Methods
Ross' machine shop uses 2500 brackets during a year with usage being constant and 250 working days per year, the brackets are purchased for $15, or they can be purchased in lots of 1000 for $14.50, though the lead time for larger orders is 3 days, compared to 1 day for any sized order.
The ordering cost is $18.75 per order. The holding cost is 10% of the unit cost
What is the total cost for both options?
Given the two options, what is your recommendation to Ross?
What is the ROP of your recommendation?
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An analysis of the holding costs, including the appropriate annual holding cost rate.
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