chapter 10 # 8

Exercise 10-17A (Algo) Using JIT to minimize holding costs LO 106 Zechary Pet Supplies purchases its inventory from a variety of suppliers, some of which requite a six-week lead lime before delivering the goods. To ensure that she has a sufficient supply of goods on hand, Ms. Leblanc, the ownet, must meintain a large supply of invertory. The cost of this inventory averages $20.600. She usuelly finances the purchase of inventory and pays a 10 percent annual finance charge. Ms. Liblanc's accountant has suggested that she establish a relationship with a single large distributor who can satisfy all of her orders within a two-week time petiod. Given this quick turnaround time, she will be able to reduce her average inventory bailance to $4,800, Ms. Leblanc also believes that she could save $2,100 per year by reducing phone bills, insurance, and warehouse rental space costs associated with ordering and maintaining the targer level of inventory. Required b. Based on the information provided, how much of Ms. Leblanc's inventory hoiding cost could be eliminated by taking the accountant's advice