Requirement $3.$ TechWorks is also considering switching from an MRP system to a JIT system. This will result in producing$$ J$-$Pods in batch sizes of $330$J$-$Pods and will reduce$$ obsolescence, improve$$ quality, and result in a higher selling price. TechWorks will reduce setup time and setup cost. The new setup cost will be $ $230$ per setup. What is the annual cost of producing and carrying$$ J$-$Pods in inventory under the JIT$$ system?

Calculate the annual cost of producing and carrying$$ J$-$Pods in inventory under the JIT system.

Cost of producing

Total variable production cost

$+$

Total setup cost

$+$

Carrying cost

$=$

and carrying

$1,089,000$

$+$

$13,800$

$+$

$1760$

$=$

$1,104,560$

Part $8$

Requirement $4.$ Compare the models analyzed in the previous parts of the problem. What are the advantages and disadvantages of$$ each?

The JIT model resulted in the

lowest

costs because

carrying costs and setup costs

were lower than for the EOQ model. The EOQ$$ model, in this$$ case, limits production to once every

four

months. This

would not

allow managers to react quickly to changing market demand or economic conditions. The

JIT

model provides management with much more flexibility.