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Question 2. A company is about to begin production of a new product. The manager of the department that produces one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units are used daily in assembling the final product. Assembly takes place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at a cost of $300. Inventory holding costs will be $10 per unit. Round to the nearest whole number a. What run quantity will minimize total annual costs (EPQ)? b. What is the length of a production run in days? c. During production, how many units a day go to inventory as opposed to into production? d. What is the cycle time for optimal run time?

Question 2. A company is about to begin production of a new product. The manager of the department that produces one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units are used daily in assembling the final product. Assembly takes place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at a cost of $300. Inventory holding costs will be $10 per unit. Round to the nearest whole number a. What run quantity will minimize total annual costs (EPQ)? b. What is the length of a production run in days? c. During production, how many units a day go to inventory as opposed to into production? d. What is the cycle time for optimal run time?

Practical Management Science
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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Question 2. A company is about to begin production of a new product. The manager of the department that produces one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units are used daily in assembling the final product. Assembly takes place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at a cost of $300. Inventory holding costs will be $10 per unit. Round to the nearest whole number a. What run quantity will minimize total annual costs (EPQ)? b. What is the length of a production run in days? c. During production, how many units a day go to inventory as opposed to into production? d. What is the cycle time for optimal run time?
Transcribed Image Text:Question 2. A company is about to begin production of a new product. The manager of the department that produces one of the components for the product wants to know how often the machine used to produce the item will be available for other work. The machine will produce the item at a rate of 200 units a day. Eighty units are used daily in assembling the final product. Assembly takes place five days a week, 50 weeks a year. The manager estimates that it will take almost a full day to get the machine ready for a production run, at a cost of $300. Inventory holding costs will be $10 per unit. Round to the nearest whole number a. What run quantity will minimize total annual costs (EPQ)? b. What is the length of a production run in days? c. During production, how many units a day go to inventory as opposed to into production? d. What is the cycle time for optimal run time?
Question 1. A large Tampa law firm uses an average of 40 boxes of copier paper a day. The firm operates 260 days a year. Storage and handling costs for the paper are $30 a year per box, and it costs approximately $60 to order and receive a shipment of paper. Round to the nearest whole number a. What order size would minimize the sum of annual ordering and carrying costs (EOQ)? b. Compute the total annual cost using your order size from part a. c. Except for rounding, are annual ordering and carrying costs always equal at the EOQ? d. The office manager is currently using an order size of 200 boxes. The partners of the firm expect the office to be managed 'in a cost-efficient manner.' Would you recommend that the office manager use the optimal order size instead of 200 boxes? Justify your answer; you will need to determine the total cost difference between the EOQ and 200 boxes/order.
Transcribed Image Text:Question 1. A large Tampa law firm uses an average of 40 boxes of copier paper a day. The firm operates 260 days a year. Storage and handling costs for the paper are $30 a year per box, and it costs approximately $60 to order and receive a shipment of paper. Round to the nearest whole number a. What order size would minimize the sum of annual ordering and carrying costs (EOQ)? b. Compute the total annual cost using your order size from part a. c. Except for rounding, are annual ordering and carrying costs always equal at the EOQ? d. The office manager is currently using an order size of 200 boxes. The partners of the firm expect the office to be managed 'in a cost-efficient manner.' Would you recommend that the office manager use the optimal order size instead of 200 boxes? Justify your answer; you will need to determine the total cost difference between the EOQ and 200 boxes/order.
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