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Chapter 4: 2AE (page 584)

Phil would like to consider the costs that his accountants are currently using for inventory carrying and setup for the gearboxes and input shafts. These costs are as follows:

Part

Cost

Gear Box

Step up = \(90 / order

Inventory carrying cost = \) 2/unit/week

Input Shaft

Set up = \(45/ order

Inventory carrying cost = \) 1/unit/week

Short Answer

Expert verified

The total inventory cost carrying costs as well as setup costs for gearboxes as well as input shafts when utilizing Lot for Lot is 1,049

Step by step solution

01

Consider the excel sheet is shown below

The excel sheet is shown below

02

The resultant values are as follows: 

The excel sheet is shown below:


Calculate Inventory cost for Gear Box as shown below:

Formulas showing Gear Box:


The resultant values are as follows:


Calculate Inventory cost for Gear Box as shown below:

Formulas showing input shaft:


The resultant values are as follows:


Determine the total cost of Gear Box and Input Shaft as shown below:

Total cost = Cost of Gear Box + Cost of Input Shaft= 728 + 321= 1049

Hence, the total cost of inventory carrying cost and setup cost to gearboxes and input shafts using Lot for Lot is 1,049

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