Littlefield Labs processes blood testing jobs and for each job, a testing kit is used. Littlefield purchases
Question:
Littlefield Labs processes blood testing jobs and for each job, a testing kit is used. Littlefield purchases the kits as raw materials from a supplier at a price of $600 each and the money is immediately deducted from an interest-bearing bank account with an annual interest rate of 6% when an inventory replenishment order is placed with the supplier. An order is placed to the supplier as soon as Littlefield runs out of inventory and for each order, the supplier also charges a fixed shipping cost of $2000 for same-day delivery, regardless of the size of the order.
It is estimated that Littlefield will have an annual demand of 1100 jobs and daily demand is relatively stable over the year. If Littlefield places an EOQ to its supplier every time, what is the expected total annual shipping cost ?
Statistics for Business and Economics
ISBN: 978-0132930192
8th edition
Authors: Paul Newbold, William Carlson, Betty Thorne