Scenario 9.3 The Talbot Company Uses Electrical Assemblies to Produce an Array

question 143

Multiple Choice

Scenario 9.3
The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year.
-Use the information in Scenario 9.3. The purchasing manager decides that, in order to save purchasing time, orders for the XO-01 will be placed every three months, or four times per year. How much does this approach cost Talbot in total annual holding and ordering costs (instead of Talbot ordering using the EOQ quantity) ?

• A) greater than $18,000
• B) greater than $14,000 but less than or equal to $18,000
• C) greater than $10,000 but less than or equal to $14,000
• D) less than or equal to $10,000

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Definitions:

Aggregate Demand

is the total demand for all goods and services within a particular market or economy at a given price level and in a given time period.

Economic Fluctuations

Variations in the level of economic activity in a country over time, characterized by periods of boom and recession.

Future Optimism

A psychological state or economic theory that anticipates positive outcomes and growth in the future.

Rising Prices

Rising prices refer to the phenomenon where the general level of prices for goods and services in an economy increases over time, often indicative of inflationary pressures.