Cost of maintaining componentsinventory under regular system

Reference no: EM13331548

Inventory costs are assummed to be 20% per year. thenumber of units of each type of component under the existing systemis calcuated as follows: those items purchased from vendorsmore than 500 miles away, a safety stock representing four weeks ofuse is maintained. for items from vendors between 100 to 500miles away, a safety stock representing two weeks is mainted. For items from closer sources, a safety stock of one week ismaintained. In addition to the safety stock, the averageinventory of anyh item is the current lost sized purchased dividedby 2.

What is the total annual cost of maintaining the componentsinventory under the regular system? What is the total annualcosts of maintianing the components using the JIT system assummingno safety stock.

Reference no: EM13331548

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