As an inventory manager, you are obligate on the order of a raw material used in the production line. The daily demand of the raw material is 420 units, a setup cost per production run is RM180, a monthly holding cost per unit is RM4.80, and an annual production rate is 375,000 units. The plant operates and experience demand 360 days per year. However, suppose that the purchasing manager mistakenly used the basic economic quantity model to calculate the batch size instead of using production order quantity model. How much value (in monetary) per year has that mistake cost the company? Explain what you have learned from this mistake. (Hint: Provides your answers in two decimal points)

As an inventory manager, you are obligate on the order of a raw material used in the production line. The daily demand of the raw material is 420 units, a setup cost per production run is RM180, a monthly holding cost per unit is RM4.80, and an annual production rate is 375,000 units. The plant operates and experience demand 360 days per year. However, suppose that the purchasing manager mistakenly used the basic economic quantity model to calculate the batch size instead of using production order quantity model. How much value (in monetary) per year has that mistake cost the company? Explain what you have learned from this mistake. (Hint: Provides your answers in two decimal points)

Name: As an inventory manager, you are obligate on the order of a raw mater
Uploaded: 2024-03-20T06:57:05.000Z
Channel: Bartleby
Description: As an inventory manager, you are obligate on the order of a raw material used in the production line. Thedaily demand of the raw material is 420 units, a setup cost per production run is RM180, a monthly holdingcost per unit is RM4.80, and an annual

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...

See similar textbooks

Similar questions

Item X is a standard item stocked in a company’s inventory of spare parts. Each year, the firm uses about 2,000 units of Item X, which costs Php 1,000 per unit. Storage costs, which include insurance and cost of capital, amount to 18 percent of item unit cost. Placing an order for more of Item X costs Php 400. The company operates 360 days per year and Item X is received 9 days after placement of order. How much would be Item X's total annual procurement cost? A. None of the above B. Php 8,485 C. Php 16,971 D. Php 2,000,000
Top Hatz Inc. makes a variety of ski hats. The average demand for the ‘Nordic Dream’ hat is 125 per week and production is capable of producing 500 hats per week. Set-up is $245. The value of the finished hats is $25 and the annual holding cost per item is 20% of its value. What is the production order quantity? What is the production time for each cycle? What is the average time between orders, assuming there are 350 days available per year? Top Hatz Inc.’s average demand for the ‘Nordic Dream’ hat increases to 350per week; its production capability improves to 700 hats per week; set-up cost falls to $95; and the annual holding cost per item increases to 35% of its value. What is the effect on POQ, production time for each cycle and average time between orders?
Al Fursan Inc. needs 300 kgs of a material per month (four weeks). It costs RO 10 to make and receive an order, and it takes 16 workdays to receive it. The annual holding cost is 30 % of purchase price. The price RO 1 per kg. The company is operating 7 days per week. What is the expected time between orders? Round-up to the nearest integer Select one: a. 105 b. 56 C. 207 d. 65 e. 39
Fursan Inc. needs 310 kgs of a material per month (four weeks). It costs RO 10 to make and receive an order, and it takes 14 work days to receive it. The annual holding cost is 15 % of purchase price. The price RO 1 per kg. The company is operating 6 days per week. At what level of inventory in Kgs should the company be placing orders? Round-up to the nearest integer Select one: a. 200 b. 175 c. 181 d. 188
The Melon Enterprise used to sell 175 bottles of 500ml vegetable cooking oil per month. The unit cost for a bottle of cooking oil is RM2.50 and the cost of placing an order has been estimated to be RM12.00. The store imposes an inventory carrying charge of 27% per year. The company have to wait 3 weeks’ time for the order to be delivered. Based on this information, calculate the following inventory decisions: (Hint: Provides your answers in two decimal points) i) Optimum order quantity, order frequency and annual total ii) The store restructures its inventory system by ordering using an automation purchasing process, the ordering cost can be by cut 65%. Determine the new optimal order quantity, order frequency and annual inventory cost. Explain your
A company uses a special widget (SP) in its production process. The company uses 100 SP units per month in a fairly uniform production process. Each SP unit costs R30. Due to the stringent controls associated with the ordering of the widget the order cost is R300 per order. The widget requires special handling and refrigeration and the cost of holding inventory is estimated to be R200 per unit year. Which order size would you recommend that the company use? Suppose the supplier of the special widget offers the company a reduced purchase price of R29/widget, but they need to order 100 or more at a time. Would you recommend that the company accept this offer? Annual demand Inventory carrying cost Order cost Purchase price 1200 widgets (100 x 12) R200/widget R300/order R30/widget
Item X is a typical object stored in a company's replacement parts warehouse. Per year, the company uses about 2,000 Item X items, and costs Php 1,000 per product. Both premiums and capital charges, storage costs contribute to 18 percent of item unit costs. It costs Php 400 to place an order for more of Item X. It runs 360 days a year and Item X is sent 9 days after order placing. How much Item X units can each be ordered? A. 94 parts. B. 95 parts C. 100 parts D. 2 thousand units
Ross White’s machine shop uses 2500 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 (or10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year. Upon hearing that Ross White is considering the producing the brackets in-house, the supplier has notified Ross that the purchase price would drop from $15 per bracket to $14.50 per bracket if Ross purchase the brackets in lots of 1000. After analyzing the cost of the various options for obtaining the brackets, Ross White recognizes that although he knows the lead time is 2 days, the average daily demand usually varies. Ross has kept careful records and has determined that the average daily demand is normally distributed with a standard deviation of 2.5 units. If Ross would like to maintain a service level of 90 %,…