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 hearing that Ross White (see Problems 6-27 and 6-28) is considering producing the brackets in-house, the vendor has notified Ross that the purchase price would drop from $15 per bracket to $14.50 per bracket if Ross would purchase the brackets in lots of 1,000. Lead times, however, would increase to 3 days for this larger quantity. a. What is the total annual inventory cost plus purchase cost if Ross buys the brackets in lots of 1,000 at $14.50 each? b. If Ross does buy in lots of 1,000 brackets, what is the new ROP? c. Given the options of purchasing the brackets at $15 each, producing them in-house at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
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.
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6-29 Upon hearing that Ross White (see Problems 6-27 and 6-28) is considering producing the brackets in-house, the vendor has notified Ross that the purchase price would drop from $15 per bracket to $14.50 per bracket if Ross would purchase the brackets in lots of 1,000. Lead times, however, would increase to 3 days for this larger quantity.
a. What is the total annual inventory cost plus purchase cost if Ross buys the brackets in lots of 1,000 at $14.50 each?
b. If Ross does buy in lots of 1,000 brackets, what is the new ROP?
c. Given the options of purchasing the brackets at $15 each, producing them in-house at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?
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