$($Inventory Management$+$Sourcing$)$ ABC Electronics has purchased one component

from its supplier for years. Since the production process of this component is quite

simple and involves no capital investment, the manager proposes to make this

component in$-$house so that the component may flow gradually into the assembly

line for use.

The following data are also given for your decision$-$making:

To Buy To Make

Annual Demand $30,000$ units $30,000$ units

Cost Per Unit $$9$ $$10$

Fixed Cost Per Order $$45$ per order $$72$

Annual Holding Cost Rate $($of Cost Per Unit$)30\%30\%$

Weekly Usage$*600$ units $600$ units

Weekly Production$*$ N$/$A $800$ units

$*$ Operates $50$ weeks a year

$($a$)$ If the Company decides to continue to buy from the supplier, what is the EOQ level?

If the company orders at the EOQ level, what will the average inventory be$?$ What

is the total annual cost $($holing cost $+$ fixed cost $+$ purchase cost$)$ if the company

chooses to buy? $(15$ points$)$

$($b$)$ If the Company decides to make the production in$-$house, what is the EPQ level?

What will the average inventory be if the company operates at the EPQ level?

What is the total annual cost $($holing cost $+$ fixed cost $+$ production cost$)$ if the

company chooses to make? $(15$ points$)$

$($c$)$ Compare the total annual cost under two strategies $($Make or Buy$).$ Do you suggest

make or buy? $(5$ points