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Problem 1 – The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
Problem 2 – For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. A new purchasing agent has been hired by the company who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following information:
Annual demand in units |
250 |
Days used per year |
250 |
Lead time, in days |
10 |
Ordering costs |
$100 |
Annual unit carrying costs |
$20 |
Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs.
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