Dream Resorts makes wine, which it bottles and sells in its on-location Restaurant/Wine Shop. It costs $1100 to set up, brew and bottle a batch of the wine. The annual cost to store the wine is $2.75 per bottle. The annual demand for the wine is 16,000 bottles and the winery has the capacity to produce 28,000 bottles annually. The current production policy is to continue producing the wine until the storage gets full. The storage holds a maximum of 750 bottles of wine. Production starts again when the inventory of wine is depleted. (assume one year = 365 days). Required: A. The owners of Dream Resorts are considering an option of increasing the wine storage space to hold a maximum of 3000 bottles as part of their expansion strategy for the next five years. Is this a good option in terms of the cost savings? Be quantitative. B. What would be an optimal production policy for the winery? How does the optimal policy compare to the initial idea of expanding the storage space to hold a maximum of 3000 bottles in terms of the cost savings? What action should management take to implement the optimal production policy when compared to the current policy of producing the wine until the storage is full?
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.
Dream Resorts makes wine, which it bottles and sells in its on-location Restaurant/Wine Shop. It costs $1100 to set up, brew and bottle a batch of the wine. The annual cost to store the wine is $2.75 per bottle. The annual demand for the wine is 16,000 bottles and the winery has the capacity to produce 28,000 bottles
annually. The current production policy is to continue producing the wine until the storage gets full. The storage holds a maximum of 750 bottles of wine. Production starts again when the inventory of wine is depleted. (assume one year = 365 days).
Required:
A. The owners of Dream Resorts are considering an option of increasing the wine storage space to hold a maximum of 3000 bottles as part of their expansion strategy for the next five years. Is this a good option in terms of the cost savings? Be quantitative.
B. What would be an optimal production policy for the winery? How does the optimal policy compare to the initial idea of expanding the storage space to hold a maximum of 3000 bottles in terms of the cost savings? What action should management take to implement the optimal production policy when compared to the current policy of producing the wine until the storage is full?
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