Question

In: Operations Management

1. A toy manufacturer uses approximately 32,000 silicon chips annually. The chips are used at a...

1. A toy manufacturer uses approximately 32,000 silicon chips annually. The chips are used at a steady rate during the 240 days a year that the plant operates. Annual holding cost is $3 per chip, and ordering cost is $120. Determine the following:

a) The optimal order quantity (EOQ)

b) The number of workdays in an order cycle

2. Determine an A-B-C classification for the following items:

Item

Unit Cost

Usage

K34

$10

200

K35

25

600

K36

36

150

M10

16

25

M20

20

80

Z45

80

200

F14

20

300

F95

30

800

F99

20

60

D45

10

550

D48

12

90

D52

15

110

D57

40

120

N08

30

40

P05

16

500

P09

10

30

Solutions

Expert Solution

Answer 1a= EOQ= (2*32000*120/3)^0.5 =1600

Answer 1b= number of workdays in an order cycle=(1600/32000)(240) = 12 days

Answer 2=

Item Unit Cost Usage Total Cost
K34 10 200 2000
K35 25 600 15000
K36 36 150 5400
M10 16 25 400
M20 20 80 1600
Z45 80 200 16000
F14 20 300 6000
F95 30 800 24000
F99 20 60 1200
D45 10 550 5500
D48 12 90 1080
D52 15 110 1650
D57 40 120 4800
N08 30 40 1200
P05 16 500 8000
P09 10 30 300
Sum 94130
Item Unit Cost Usage Total Cost % inventary % inventary
K34 10 200 2000 (2000/94130)*100 2.12
K35 25 600 15000 (15000/94130)*100 15.94
K36 36 150 5400 (5400/94130)*100 5.74
M10 16 25 400 (40/94130)*100 0.42
M20 20 80 1600 (1600/94130)*100 1.70
Z45 80 200 16000 (16000/94130)*100 17.00
F14 20 300 6000 (6000/94130)*100 6.37
F95 30 800 24000 (24000/94130)*100 25.50
F99 20 60 1200 (1200/94130)*100 1.27
D45 10 550 5500 (5500/94130)*100 5.84
D48 12 90 1080 (1080/94130)*100 1.15
D52 15 110 1650 (1650/94130)*100 1.75
D57 40 120 4800 (4800/94130)*100 5.10
N08 30 40 1200 (1200/94130)*100 1.27
P05 16 500 8000 (8000/94130)*100 8.50
P09 10 30 300 (300/94130)*100 0.32
Sum 94130

Arranging % inventory in descending order

Item Unit Cost Usage Total Cost % inventary
F95 30 800 24000 25.50
Z45 80 200 16000 17.00
K35 25 600 15000 15.94
P05 16 500 8000 8.50
F14 20 300 6000 6.37
D45 10 550 5500 5.84
K36 36 150 5400 5.74
D57 40 120 4800 5.10
K34 10 200 2000 2.12
D52 15 110 1650 1.75
M20 20 80 1600 1.70
N08 30 40 1200 1.27
F99 20 60 1200 1.27
D48 12 90 1080 1.15
M10 16 25 400 0.42
P09 10 30 300 0.32

Cumulative % inventory=

Item Unit Cost Usage Total Cost % inventary Cumulative % inventory
F95 30 800 24000 25.50 25.5
Z45 80 200 16000 17.00 42.50
K35 25 600 15000 15.94 58.43
P05 16 500 8000 8.50 66.93
F14 20 300 6000 6.37 73.31
D45 10 550 5500 5.84 79.15
K36 36 150 5400 5.74 84.89
D57 40 120 4800 5.10 89.99
K34 10 200 2000 2.12 92.11
D52 15 110 1650 1.75 93.86
M20 20 80 1600 1.70 95.56
N08 30 40 1200 1.27 96.84
F99 20 60 1200 1.27 98.11
D48 12 90 1080 1.15 99.26
M10 16 25 400 0.42 99.68
P09 10 30 300 0.32 100.00

Classification=

Item Unit Cost Usage Total Cost % inventary Cumulative % inventory
F95 30 800 24000 25.50 25.5 A
Z45 80 200 16000 17.00 42.50 A
K35 25 600 15000 15.94 58.43 A
P05 16 500 8000 8.50 66.93 A
F14 20 300 6000 6.37 73.31 A
D45 10 550 5500 5.84 79.15 B
K36 36 150 5400 5.74 84.89 B
D57 40 120 4800 5.10 89.99 B
K34 10 200 2000 2.12 92.11 B
D52 15 110 1650 1.75 93.86 C
M20 20 80 1600 1.70 95.56 C
N08 30 40 1200 1.27 96.84 C
F99 20 60 1200 1.27 98.11 C
D48 12 90 1080 1.15 99.26 C
M10 16 25 400 0.42 99.68 C
P09 10 30 300 0.32 100.00 C

Class A= up to 75% of the total value

Class B= From 76% to 94% of the total value

Class C = From 95% tto 100% of the total value

'

keosha answered 2 hours ago
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