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*.

keosha answered 5 months ago
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