BBA Ltd (BBA) is a distributor of semiconductors products. It purchases an integrated circuit (IC) product...

 

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BBA Ltd (BBA) is a distributor of semiconductors products. It purchases an integrated circuit (IC) product called "Power' from a global semiconductors manufacturer at a wholesale cost of $200 and resells it to end customers. BBA forecasts that demand for 'Power' in 2020 is 500,000 units. Ordering costs are $800 per order. The insurance cost and opportunity cost of holding inventory are $40 and $10 per unit, respectively. BBA spent $3,000,000 appointing a consultant to investigate whether the just-in-time (JIT) purchasing method is suitable to them. The CFO of BBA, Linda, states that since the company spent $3,000,000 appointing a consultant for the JIT project, in order not to waste the consultation fees, BBA should implement the JIT purchasing method. a Compute the optimal order quantity using the EOQ model. b Determine the following: i The number of orders per year; and ii The annual relevant total cost of ordering and carrying inventory. c Explain whether you agree with Linda. Illustrate your answer with one example. BBA Ltd (BBA) is a distributor of semiconductors products. It purchases an integrated circuit (IC) product called "Power' from a global semiconductors manufacturer at a wholesale cost of $200 and resells it to end customers. BBA forecasts that demand for 'Power' in 2020 is 500,000 units. Ordering costs are $800 per order. The insurance cost and opportunity cost of holding inventory are $40 and $10 per unit, respectively. BBA spent $3,000,000 appointing a consultant to investigate whether the just-in-time (JIT) purchasing method is suitable to them. The CFO of BBA, Linda, states that since the company spent $3,000,000 appointing a consultant for the JIT project, in order not to waste the consultation fees, BBA should implement the JIT purchasing method. a Compute the optimal order quantity using the EOQ model. b Determine the following: i The number of orders per year; and ii The annual relevant total cost of ordering and carrying inventory. c Explain whether you agree with Linda. Illustrate your answer with one example.

Answer rating: 100% (QA)

a The optimal order quantity can be calculated using the EOQ model which is given by the following e... View the full answer