Difference between the original policy and the new policy

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Reference no: EM131438241

One item they sell is the Left Handed Monkey Wrench, or SKU WML999 that is manufactured by Wilson Worldwide. The WML999 is a steady seller for Dexter Inc. They have been selling them for several decades and the demand has been remarkably constant and stable with no variation, trend or seasonality. The average demand for Left Handed Monkey Wrenches is 260 units per year. The cost to Dexter Inc for the Left Handed Monkey Wrench is 72 $/item and they sell them for 112 $/item to their customers. It costs just 5 $/order for Dexter Inc. to place an order to Wilson Worldwide and the lead time is 1 week. Dexter's annual inventory holding cost is 20% and for this problem assume there are 52 weeks per year. Unfortunately, Wilson Worldwide has recently changed its ordering policy and is requiring all orders for Left Handed Monkey Wrenches to be in cases of 25 each. You cannot order partial cases.

Based on your analysis, what is the expected annual total cost (purchasing, ordering, and inventory holding) difference between the original policy and the new policy of having to order in cases of 25 each? Enter your answer in integer dollars. For example, if the costs went up by $2,304 per year, enter 2304. If the costs went down by $2,304 per year, enter -2304. Do not enter a dollar sign in the solution?

Reference no: EM131438241

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