Freedom Safe makes a variety of safes for home use. Many parts in their bills of materials (BOMs) are standard items that can be used across a number of products. For example, one dial is used on a number of safes.
In recent months the company has been implementing JIT and Lean principles in order to reduce costs and improve quality. One such initiative has led to a VMI (vendor managed inventory) agreement with its dial supplier, thus reducing Freedom Safe's ordering costs from $25 to $3.50. Annual demand for this dial is 30,000 units. Annual holding costs are $1.25 per dial.
Based on this information, what will be the new optimal order quantity for dials (using the reduced ordering cost)? (Display your answer to two decimal places.)
When using the reduced ordering cost, as compared to the original ordering cost, how many dials on average will Freedom Safe hold in inventory (assuming they hold no safety stock)? Display your answer to two decimal places.)
What will be the annual total combined savings to ordering costs and holding costs when using the reduced order cost, as compared to the original ordering cost? (Display your answer to two decimal places.)