24) The Plastic Saver company produces a specialty plastic product, and has the following information available concerning its inventory items:
Relevant ordering costs per purchase order$450
Relevant carrying costs per year:
Required annual return on investment15%
Required other costs per year$3.50
Annual demand is 30,000 packages per year. The purchase price per package is $45.
Required:
a.Compute the economic order quantity and the relevant total costs.
b.Compute the total relevant costs, assuming the quantity ordered equals 1,250 units. How many deliveries will be required at the economic order quantity?
25) Dane Manufacturing expects to spend $825,000 in 2013 in appraisal costs if it does
not
change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $78,000 in fixed appraisal costs and variable costs of $0.40 per unit of finished product. The new method involves $125,000 in training costs and an additional $155,000 in annual equipment rental. It takes two units of material for each finished product.
Internal failure costs average $150 per failed unit of finished goods. During 2012, 5% of all completed items had to be reworked. External failure costs average $425 per failed unit. The company's average external failures are 1% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used.
How much will external failure costs change, assuming 825,000 units of materials are received and product failures with customers are cut in half, with the new receiving method?
A) $402,200
B) $412,500
C) $424,800
D) $434,200
E) $442,800