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Xander Company Anticipates That Usage of Component T Will Be

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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.


Definitions:

Sinking Funds

A type of savings account or fund that is set up to repay debt or an outstanding loan, making periodic payments into the fund for this purpose.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell the products, and collect cash from the sales.

Maturity Value

The total amount payable to an investor at the end of a bond's term, including both the principal and the interest.

Bonds

Fixed-income investments representing loans made by an investor to a borrower, typically corporate or governmental.

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