Question

In: Operations Management

Assume that a production line operates such that the production lot size model of  is applicable. Assume...

Assume that a production line operates such that the production lot size model of  is applicable. Assume that D = 6,500 units per year, Co = $120, and Ch = $3 per unit per year.

a. i. 8,300 units per year
ii. 11,000 units per year
iii. 34,500 units per year
iv. 90,000 units per year
If required, round your answers to the nearest whole number.
i. P = 8,300 Q* =
ii. P = 11,000 Q* =
iii. P = 34,500 Q* =
iv. P = 90,000 Q* =
b. Compute the EOQ recommended lot size using equation
If required, round your answer to the nearest whole number.
Q* =



Comparing the EOQ lot size to the production lot sizes in parts i, ii, iii, and iv, what two observations can you make about the relationship between the EOQ model and the production lot size model?

Production Lot Size Q* is always (Greater or less)  than the EOQ Q* with the same D, Co, and Ch

As the production rate P (Increases or decreases) , the recommended Q* decreases, but always remains (Greater or Less)

than the EOQ Q*.

Solutions

Expert Solution

Annual Demand Days per year

Daily

Demand

6500 365 17.808
Annual Production capacity 8300 11000 34500 90000
Days per year 365 365 365 365
Daily production rate, p Given 22.74 30.14 94.52 246.58
Daily demand/usage rate, d D/o 17.808 17.808 17.808 17.808
Annual demand, D= demand per day*operation days per year 6500 6500 6500 6500
Setup or cost per order, S Given $120.00 $120.00 $120.00 $120.00
holding cost per year, H= holding cost percent*item cost $3.00 $3.00 $3.00 $3.00
Production order quantity, Q= SQRT(2*S*D/(H*(1-d/p))) 1548.48 1127.44 800.45 748.65
Production order quantity, Q= rounded-off 1548 1127 800 749
Answer a (i) Answer a (ii) Answer a (iii) Answer a (iv)


Answer b: (i)

Annual demand, D= (demand per period)*(periods per year)                   6,500
Order cost or setup cost, S 120
holding cost per year, H= (holding cost percent)*(item cost) $3.00
Order quantity, Q= squareroot(2*S*D/H) 721.110
Order quantity, Q= rounded-off 721 units Answer

Comparing the EOQ lot size to the production lot sizes in parts i, ii, iii, and iv, what two observations can you make about the relationship between the EOQ model and the production lot size model?

Production Lot Size Q* is always Greater than the EOQ Q* with the same D, Co, and Ch

As the production rate P Increases , the recommended Q* decreases, but always remains Greater than the EOQ Q*.


Related Solutions

Lot Price Data Lot Price is lot price in $1000s Lot Size is lot size in...
Lot Price Data Lot Price is lot price in $1000s Lot Size is lot size in 1000s of square feet Mature Trees is the number of mature trees on the property Distance from Water is the distance from the edge of property to the water in feet Distance from Road is the distance from the main road to the center of the property in miles Lot Price Lot Size Mature Trees Distance from Water Distance from Road 105.4 41.2 24...
You manage a production line that operates using a monthly production cycle. There are five different...
You manage a production line that operates using a monthly production cycle. There are five different products that could be made this month. However, you only have 500 hours of line capacity, so you must be careful which products you select to make in the production cycle. Making a product incurs two types of setup costs: (1) a material “tear down” cost (measured in dollars) and (2) downtime for line preparation (measured in hours). Any quantity up to the forecasted...
AN=UNITS OF MODEL A PRODUCED ON THE NEW PRODUCTION LINE AO= UNITS OF MODEL A PRODUCED...
AN=UNITS OF MODEL A PRODUCED ON THE NEW PRODUCTION LINE AO= UNITS OF MODEL A PRODUCED ON THE OLD PRODUCTION LINE BN= UNITS OF MODEL B PRODUCED ON THE NEW PRODUCTION LINE BO= UNITS OF MODEL B PRODUCED ON THE OLD PRODUCTION LINE MIN 30AN+50AO+25BN+40BO=Z SUBJECT TO,                                                                                                     AN+AO ≥ 50,000 Minimum production of model A BN+BO ≥ 70,000 Minimum production of model B AN+BN ≤ 80,000 Capacity of new production line AO+BO ≤ 60,000 Capacity of old production line OBJECTIVE...
A manufacturing company operates two production lines.when both lines are operating,the production rate on each line...
A manufacturing company operates two production lines.when both lines are operating,the production rate on each line is 500 units per hour.At this production rate on each line is 500 per hour.At this production rate the failure rate of line 1 is 3 failures per 8-hr day(CFR) and the failure rate of line 2 is 2 failures per 8-hr day.when one line fails.the production rate of the second line must be increased in order to make production quotas.At the increased rate...
The simple economic order quantity (EOQ) model shows how much to order (i.e., lot size) in...
The simple economic order quantity (EOQ) model shows how much to order (i.e., lot size) in terms of holding costs, setup (ordering) costs, and total inventory cost.  In terms of this model, why is it necessary to reduce setup cost if we desire smaller lot sizes? Draw the inventory cost curves diagram and fully explain.
Management Instructions Beginning Inventory    1,207 Safety Stock       200 Lot Size       600 Master Production...
Management Instructions Beginning Inventory    1,207 Safety Stock       200 Lot Size       600 Master Production Schedule Period 1 2 3 4 5 6 7 8 Demand    2,400    6,100    6,400    4,900    4,800    4,800    7,000    7,950 Customer Orders    4,105    5,580    6,850    4,850    3,300    2,000    4,000    9,145 Projected On-Hand Inventory (POHI) (at the end of the period) Master Production Schedule Available To Promise (1-period look ahead)
Is the evolutionary model applicable to development economics? Explain
Is the evolutionary model applicable to development economics? Explain
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting,...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $233,000, $386,000, and $193,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting,...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $266,000, $381,000, and $209,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting,...
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance. The accumulated costs in the three service departments were $251,000, $418,000, and $207,000, respectively. Management is concerned that the costs of its service departments are getting too high. In particular, managers would like to keep the costs of service departments under $3.50 per unit on average. You have been asked to allocate service department costs...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT