Xander Company Anticipates That Usage of Component T Will Be

question 44

Essay

Xander Company anticipates that usage of Component T will be 100 units daily,which equates to around 25,000 for the year.The material is expected to cost $5 per unit.Once an order is placed with its vendor,it takes five days to receive the goods,and the cost of placing each order is $50.As a result,Xander keeps 1,000 units on hand to avoid stockouts.The carrying cost associated with each unit is $10.
a.Compute the order point.
b.Determine the most economical order quantity.

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Definitions:

Interest Income

The income earned from lending funds or investing in interest-bearing financial instruments, such as saving accounts, bonds, or loans.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding costs related to production.

Law of Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain at a constant.

Marginal Product

The additional output that is produced by employing one more unit of a particular input, keeping all other inputs constant.