Inventory Control Models Problem
Upon hearing that Ross White (see Problems 27 and 28) is considering producing the brackets in-house, the vendor has notifies Ross that the purchase price would drop from $15 per bracket to $14.50 per bracket if Ross will purchase the brackets in lots of 1,000. Lead times, however, would increase to 3 days for this larger quantity.
(a) What is the total annual inventory cost plus purchase cost if Ross buys the brackets in lots of 1,000 at $14.50 each?
(b) If Ross does buy in lots of 1,000 brackets, what is the new ROP?
(c) Given the options of purchasing the brackets at $15 each, producing them in-house at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?