Question

Question 4 (1 point) (Same problem data.) The Burdell Wheel and Tire Company assembles tires to wheel rims for use on irrigation systems. Burdell wants to locate a low-cost tire supplier and has narrowed the list to two candidates. Each supplier sells tires in a single batch size that's determined by the production process they use. Burdell's annual requirements are for 25,000 tires, and the company operates 250 days a year. The following data are available for two suppliers being considered. Supplier Shipping Price / Inventory Hold Lead Time Admin. Tire (P) Costs (H) (Days) Costs Lexington Tire 2,000 $18,000 $30 $6.00 $15,000 IrmoAuto 1,000 $25,000 $29 $5.80 $18,000 What are the total annual costs if Irmo Auto is the supplier selected? Quantity (Q) Freight Costs 1) $769,320 2) $773,220 3) $791,600 O4) $792,600

Answer 1

Total Annual Cost = Freight Cost + Material Cost + Inventory Holding Cost + Transit Inventory Cost + Admin Cost

TAC = 25000 + 25000*29 + (1000*5.8/2) + (25000*4*5.8/250) + 18000

TAC = 25000+725000+2900+2320+18000

TAC = 773220

Correct option will be 2) $773220.