Smart Products Assume a 365 Day Year

Smart Products
Assume a 365 day year.

Smart Products buys 300,000 units of a crucial input per year from a supplier that fulfills its orders within two days of receiving them. Smart Products submits its orders directly to the supplier through a web interface, so its lead time is the supplier’s two day turnaround time. Each order costs Smart Products about $500 to place, while carrying costs are about $60 per unit per year. The company seeks to maintain a five day usage level in a safety stock.

-Which would improve Smart Product's total cost at the EOQ more,a 15% reduction in carrying costs or a 10% reduction in order costs?

A) decreasing order costs decreases total cost by $10,062
B) decreasing order costs decreases total costs by $6,700
C) decreasing carrying costs decreases total costs by $10,062
D) decreasing carrying costs decreases total costs by $6,700