Essay
Timber Company sells 900 units of its deluxe product each year. The cost of setting up for one production run is $150; the cost of carrying one unit in inventory for a year is $3. Timber currently produces 100 deluxe units in one production run.
A. Calculate the annual setup cost of the current policy.
B. Calculate the annual carrying cost of the current policy.
C. Calculate the total inventory-related cost of the current policy.
D. Do you suppose that the current production run is smaller or larger than the EOQ? Why?
Correct Answer:
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A. Annual setup cost = (900/100) × $150 ...View Answer
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