2. Calculate the economic order quantitiy. Because of the high setup cost of $60/order forproducing push lawnmowers, production is ordered in specified quantities instead of lot-for-lot.Calculate the economic order quantity for push mowers (assume independent of model; holding costare given above). This quantity will be used as the lot size for the MRP. [Hint - convert holding costgiven above to annual in this calculation.] LAWN KING PROJECTLawn King produces a couple models of push lawn mowers. A total of 60 workers are currentlyemployed to work on the assembly line. Hiring cost is $800 for each new employee, while the cost oflaying off an employee is $1200. The production strategy in current use is a one-shift-per-day levelstrategy at average demand. Differences between demand and production are balanced by inventoryand backorders. If a backorder occurs, the order is filled from the next available production run andsafety stock is consumed if needed and replenished later. Lawn King utilizes a $7/unit carrying cost permonth for inventory, and backorders have a cost of $10/unit per month. Production is estimated at 5mowers per worker per shift, and the assembly line operates 20 working days (shifts) per month. LawnKing keeps 500 mowers as safety stock, which will be the beginning inventory for September. Theregular time cost of production is $50 per lawn mower.[Hint: production = (# of workers) ( # of mowers each worker produces per shift) (# of shifts per month)]Each May an aggregate production plan is prepared for the upcoming fiscal year that starts inSeptember. The aggregate plan is used for personnel planning, inventory planning, and budgetpreparation.

EOQ is a statistical and mathematical concept used in production and operations management. It reveals how much quantity of units an organization should produce so that demand can be met and at the same time inventory-related costs can be minimized. This concept was introduced by F.W. Harris, an engineer in 1913. This concept tries to minimize the cost of ordering, storing, and using the inventory while it is in possession of the company. Today this concept is widely used by organizations and this model successfully solves the purpose it was originally designed for. This model help to order the perfect quantity of units so that stock levels in a business are never too low or in excess. Either of these conditions is not fruitful for any company under any given circumstances. This model helps to avoid that uncertain situation and lets the organization know how much to order without taking any financial risk in the future. The following information is given to us: The number of workers is 60 Mowers produced by each worker are 5 The number of shifts in a month is 20 The ordering cost (setup cost) is $60 The backorder cost per month is $10 The carrying cost is $7 per month The first computation here will be for figuring out the annual production or demand. Annual requirement (D) = 60 × 5× 20 = 6000 mowers monthly. =6000 ×12 = 72,000 mowers. Back ordering Cost (Cs) = $10 × 12 = $120 Ordering Cost (Co) = $60 Holding Cost (Cc) = $7 × 12 = $84 Here to compute EOQ, a different formula will be used that is of EOQ with back order. Q = 2CoDCcCs + CcCs = 2×60×7200084120 +84120= 86,40,00084×1.7= 102857.14 ×1.7= 418.15

Business

Operations Management

2. Calculate the economic order quantitiy. Because of the high setup cost of $60/order for producing push lawnmowers, production is ordered in specified quantities instead of lot-for-lot. Calculate the economic order quantity for push mowers (assume independent of model; holding cost are given above). This quantity will be used as the lot size for the MRP. [Hint - convert holding cost given above to annual in this calculation.]

2. Calculate the economic order quantitiy. Because of the high setup cost of $60/order for producing push lawnmowers, production is ordered in specified quantities instead of lot-for-lot. Calculate the economic order quantity for push mowers (assume independent of model; holding cost are given above). This quantity will be used as the lot size for the MRP. [Hint - convert holding cost given above to annual in this calculation.]

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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If D = 7,700 per month, S =$42 per order, and H = $2.00per unit per month, a) What is the economic order quantity? The EOQ is enter your response here units (round your response to the nearest whole number). b) How does your answer change if the holding cost doubles? The EOQ is enter your response here units (round your response to the nearest whole number). c) What if the holding cost drops in half? The EOQ is enter your response here units (round your response to the nearest whole number).
6-27 Ross White’s machine shop uses 2,500 brackets during the course of a year, and this usage is relatively constant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost per bracket per year is $1.50 (or 10% of the unit cost), and the ordering cost per order is $18.75. There are 250 working days per year. 6-28 Ross White wants to reconsider his decision of buying the brackets and is considering making the brackets in-house. He has determined that setup cost would be $25 in machinist time and lost production time and that 50 brackets could be produced in a day once the machine has been set up. Ross estimates that the cost (including labor time and materials) of producing one bracket would be $14.80. The holding cost would be 10% of this cost. ^ I 6-29 Upon…
Subject: calculus
Lead Time = 2 Weeks Safety Stock = 10 Units Order Quantity = Lot for Lot (produce or order exactly what is needed. Period 1 4 5 Gross Requirements 40 0 10 15 75 Scheduled Receipts 40 On Hand Inventory 25 25 25 15 10 10 Planned Order Relaeses 0 10 75 The following transactions occur during period 1: 5 units of the scheduled receipt of 40 in period 1 are scrapped. 40 units of part N are disbursed in period 1. (The gross requirements of 40 are met.) Referring to the above information, assume that the 5 units of scrap were recorded properly and that 8 more parts, not previously shown by the records, were found. When the MRP record is updated for the beginning of period 2, the projected on-hand balance for period 3 would be: a. Greater than 15 but less than or equal to 20 units. O b. Greater than 20 units. O c. Greater than 10 but less than or equal to 15 units. O d. Less than or equal to 10 units. 2.
Current decision to buy: Ross White's machine shop uses 300 brackets each month during the course of a year. This usage is relatively constant throughout the year. Currently, these brackets are purchased from a supplier 100 miles away for $25 each and the lead time is 2 days. The holding cost per bracket per year is $3.75 (15% of the unit cost) and the annual ordering cost per order is $18.50. There are 240 working days per year. Possible future decision to make in-house: Ross White is reconsidering his decision of buying the brackets and is considering making the brackets in-house. He has determined the set up costs would be $22.50 in machinist time and lost production time. Forty eight brackets could be produced in a day once the machine has been set up. Ross estimates that the cost (including labor and materials) of producing one bracket would be $22.85. The holding cost would be 12% of the cost. What is the EOQ given Ross' current decision to buy the brackets? What is the…
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53. Average demand for a particular item is 1,200 units per year. It costs $100 to place an ordem for this item, and it costs $24 to hold one unit of this item in inventory for one year. If the fixed order-interval model is chosen in this instance, how often (on average) will this item be ordered a) Once a month b) Once every other month c) Twice a month d) Twice every three months e) Three times every two months 54. The EOQ model is most relevant for which one of the following? a) Ordering items with dependent demand b) Determination of safety stock c) Ordering perishable items d) Determining fixed interval ordering quantity e) Determining fixed order quantity 55. What type of process would a paper mill be most likely to use? a) Continuous flow b) Project c) Job shop d) Flow shop 56. The transportation model method that is used to evaluate location alternatives minimizes t a) sources b) destinations c) capacity d) shipping costs
Lot Size: Allocated: 120 0 Safety Stock: 10 Lead Time: 3 Gross Requirements Scheduled Receipts Projected On-hand Projected Available Net Requirements Planned Order Receipts Planned Order Releases 140 1 40 100 2 40 60 3 40 20 120 Periods Disaurch 4 40 100 80 56 40 40 6 40 0 47. The situation presented in the chart above is in proper balance. If the demand in the fourth period were to be changed from 40 to 10, which of the following would be true? The on hand would reach 10 in Period 4 but no action would be recommended A recommendation to increase the scheduled receipt of 100 to 120 and to reschedule it from Period 4 to Period 3 would be made. A recommendation to reschedule the scheduled receipt of 100 for Period 4 to Period 5 and to cancel the planned order release for 120 in Period 3 would be made A recommendation to reschedule the scheduled receipt of 100 for Period 4 to Period 5 would be made with no other changes needed
XXX Company stocks part AA at its warehouse for supplying field service offices. The yearly demand for these parts is 2600 units. XXX Company estimates its annual holding cost for this item to be $ 10 per unit. The cost to place and process an order is $30. The company operates 300 days per year, and the lead time to receive an order is 10 days. The standard deviation of the demand is 15. a. Find the economic order quantity b. Find the total cost c.Determine the ROP needed if the manager wants an annual service level of 99.9 percent. 12 Z- 3.1 15
11.5 If sigma is 150 units, and the demand during the lead time is 200 units, calculate the safety stock and order point for: a. A 50% service level. b. An 85% service level.
Given 150 units of beginning inventory, a lead time of oneperiod, an ordering cost of $400 per order, and a holdingcost of $2 per unit per period, determine which lot sizing technique would result in the lowest total cost for the fol-lowing demand data. Period 1 2 3 4 5 6 7 8Gross Requirements 100 90 85 70 150 200 300 250
Suppose that the EOQ is 100, average annual demand is1,000 units, and the lead time demand is a random variablehaving the distribution shown in Table 15.a What value of SLM1 corresponds to a reorder pointof 25?b If we wanted to attain a 95% value of SLM1, whatreorder point should we choose?c If we wanted an average of at most two stockouts peryear, what reorder point should we choose? Lead TimeDemand Probability10 16 15 14 20 14 25 112 30 14