Determine the annual setup cost and the annual carrying cost for product Y for the economic order quantity. (Assume 52 weeks of operation per year.)
A company produces item Y, and uses the basic EOQ model for managing its inventory. Lead time to obtain item Y is two weeks. Demand is normally distributed with a mean of 400 units per week and a standard deviation of 40 units per week. The desired service level is 98.5%. The ordering cost is $20, and carrying cost is 20% of the items cost, which is $10.
Answer: $1289.96 for both; $644.98 each
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A company using a ______ strategy offers carefully designed products or services to appeal to the unique needs and preferences of a narrow, well-defined group of buyers.
a. broad differentiation b. focused differentiation c. segment-based d. core competence
onsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows:
| Activity | Budgeted Activity Cost | Activity Base | |
| Casting | $570,000 | Machine hours | |
| Assembly | 80,000 | Direct labor hours | |
| Inspecting | 42,000 | Number of inspections | |
| Setup | 38,000 | Number of setups | |
| Materials handling | 23,750 | Number of loads | |
Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow:
| Activity Base | Entry | Dining | Total | |||
| Machine hours | 6,000 | 13,000 | 19,000 | |||
| Direct labor hours | 3,000 | 2,000 | 5,000 | |||
| Number of inspections | 600 | 400 | 1,000 | |||
| Number of setups | 300 | 200 | 500 | |||
| Number of loads | 450 | 500 | 950 | |||
| Units produced | 6,000 | 3,000 | 9,000 | | ||
a. Determine the activity rate for each activity.
| Activity | Activity Rate | |
| Casting | $fill in the blank 1 | per machine hour |
| Assembly | $fill in the blank 2 | per direct labor hour |
| Inspecting | $fill in the blank 3 | per inspection |
| Setup | $fill in the blank 4 | per setup |
| Materials handling | $fill in the blank 5 | per load |
b. Use the activity rates in (a) to determine the total and per-unit activity costs associated with each product. Round the per unit amounts to the nearest cent.
| Product | Total Activity Cost | Activity Cost Per Unit |
| Entry Lighting Fixtures | $fill in the blank 6 | $fill in the blank 7 |
| Dining Room Lighting Fixtures | $fill in the blank 8 | $fill in the blank 9 |