ABC Manufacturing produces a product for which the monthly demand is 900 units. Production averages 100...

ABC Manufacturing produces a product for which the monthly demand is 900 units. Production averages 100 units per day. Holding costs are $2.00 per unit per year, and setup cost is $200.00. the company operates 240 days per year

a. If the company wishes to produce this product in economic batches, what size batch should be used?

b. What is the maximum inventory level?

c. What is the average inventory?

d. How many order cycles are there per year?

e. What are the total cost of managing the inventory? $

Solutions

Expert Solution

ANNUAL DEMAND = 10800

SETUP COST = 200

HOLDING COST = 2

DAILY PRODUCTION = 100

DAILY USAGE = DAILY USAGE = 10800 / 240 = 45

@# ANSWER #@

EPQ = SQRT(2 * DEMAND * SETUP COST / HOLDING COST) * SQRT(DAILY PRODUCTION / DAILY PRODUCTION - DAILY USAGE)

EPQ = SQRT(2 * 10800 * 200 / 2) * SQRT(100 / 100 - 45) = 1982

MAXIMU M INVENTORY = (Q / DAILY PRODUCTION) * (DAILY PRODUCTION - DAILY USAGE)

(1982 / 100) * (100 - 45) = 1090

AVERAGE INVENTORY = MAXIMUM INVENTORY / 2

1090 / 2 = 545

ORDER CYCLES = Q / DAILY USAGE

1982 / 45 = 44.04

TOTAL COST OF MANAGING = (MAXIMUM INVENTORY / 2 * HOLDING COST) + (DEMAND / Q * SETUP COST)

((1090 / 2) * 2 + ((10800 / 1982) * 200) = 2179.81 OR 2180

keosha answered 1 year ago

Next > < Previous

Related Solutions

Demand for a particular product was found to change from 1200 units to 900 units when...

Demand for a particular product was found to change from 1200 units to 900 units when the income of the consumer fell from Rs. 45,000 to Rs. 41,000. Compute the income elasticity of demand for the product.

A product with an annual demand of 900 units has Co = $18.50 and Ch =...

A product with an annual demand of 900 units has Co = $18.50 and Ch = $7. The demand exhibits some variability such that the lead-time demand follows a normal probability distribution with µ = 26 and σ = 6. Note: Use Appendix B to identify the areas for the standard normal distribution. a) What is the recommended order quantity? Round your answer to the nearest whole number. b) What are the reorder point and safety stock if the firm...

Daily demand for a product is 100 units, with a standard deviation of 35 units. The...

Daily demand for a product is 100 units, with a standard deviation of 35 units. The review period is 10 days and the lead time is 5 days. At the time of review there are 40 units in stock. If 95 percent service probability is desired, how many units should be ordered? (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final...

Stylez Corp. has a monthly demand of 2,000 units for a product. The product is used...

Stylez Corp. has a monthly demand of 2,000 units for a product. The product is used at a constant rate over the 365 days. The annual holding cost for the product is estimated to be $4.00 per unit and the cost of placing each order is $150.00. Current order quantity ( lot size) is 1000 units. 1) What is the total annual inventory cost for Stylez Corp, if it orders as per EOQ? 2) What is the extra cost, if...

ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of...

ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of $100,000 each based on current demand. The Chief Marketing Officer forecasts growth of 50 units per year through 2025. The $100,000 price will be constant for 5 years. However, ABC cannot produce more than 1,000 units annually. They must update plant or replace it. If replaced, initial working capital of $5 million is required. RRR is 14%. Using excel functions, calculate NPV for both...

ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of...

ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of $100,000 each based on current demand. The Chief Marketing Officer forecasts growth of 50 units per year through 2025. So, the demand will be 1,025 units in 2021, 1,075 units in 2022, etc. and the $100,000 price will remain consistent for all five years of the investment life. However, ABC cannot produce more than 1,000 units annually based on current capacity. In order to...

ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of...

ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of $100,000 each based on current demand. The Chief Marketing Officer forecasts growth of 50 units per year through 2025. So, the demand will be 1,025 units in 2021, 1,075 units in 2022, etc. and the $100,000 price will remain consistent for all five years of the investment life. However, ABC cannot produce more than 1,000 units annually based on current capacity. In order to...

Stlyez Corp. has a monthly demand of 2,000 units for a product.The product is used...

Stlyez Corp. has a monthly demand of 2,000 units for a product. The product is used at a constant rate over the 365 days. The annual holding cost for the product is estimated to be $4.00 per unit and the cost of placing each order is $150.00. Current order quantity (lot size) is 1000 units.If Stlyez Corp. orders as per EOQ, how many orders will be placed annually?Select one:A) 21B) 18C) 6D) 5E) None of the above

1. COVID-19 Ltd produces a specialized product; LOCKDOWN which has a constant monthly demand of 4000...

1. COVID-19 Ltd produces a specialized product; LOCKDOWN which has a constant monthly demand of 4000 units. The LOCKDOWN requires a component which COVID-19 Ltd purchases from a supplier at GHS10 per unit. The component requires a three-day lead time from the date of order to the date of delivery. The ordering cost is GHS0.60 per order and the holiday cost is 10% per annum. Required to: Calculate The economic order quantity. The number of orders required per year....

Consider monthly demand for the ABC Corporation as shown below. Forecast the monthly demand for Year...

Consider monthly demand for the ABC Corporation as shown below. Forecast the monthly demand for Year 6 using the 3-period moving average and 4-period moving average. Evaluate the bias, TS, MAD, MAPE and MSE. Evaluate the quality of the forecast Sales Year 1 Year 2 Year 3 Year 4 Year 5 JAN 2000 3000 2000 5000 5000 FEB 3000 4000 5000 4000 2000 MAR 3000 3000 5000 4000 3000 APR 3000 5000 3000 2000 2000 MAY 4000 5000 4000 5000...

Subjects