You are in charge of the replenishment of component A. The annual demand is 20,000 units. The

Question:

You are in charge of the replenishment of component A. The annual demand is 20,000 units. The purchasing cost is $50 dollars per component. Placing on order has a fixed cost of $ 500 and fixed lead-time of 2 weeks. The is 10% per year.
a. Determine the optimal ordering level for component A. What is the total annual holding + ordering + purchasing cost? What is the optimal Reorder Point?
b. Suppose that you decide to order component A only 4 times per year. What is the total annual holding + ordering + purchasing cost in this case?
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...