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 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year. a) i) What is Ross White’s optimal order quantity? ii) What is the company’s total cost of inventory? b) Ross White wants to re-consider his decision of buying the brackets and is considering making the brackets in-house. He has determined that set-up cost would be $25 in machinist time and lost production time. Ross estimates that the cost (including labor time and materials) of producing one bracket would be $14.80, and that holding cost will be 10% of this cost. i) What is Ross Whites’ optimal production quantity? ii) If Ross White uses the optimal production quantity, what would be his annual cost of inventory? c) 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. i) What is the total annual cost of inventory if Ross buys the brackets in lots of 1000at $14.50 each? ii) Given the options of purchasing the brackets at $15 each, producing them inhouse at $14.80, and taking advantage of the discount, what is your recommendation to Ross White? d) 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 %, what should his re-order point be?
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
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 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year.
a) i) What is Ross White’s optimal order quantity?
ii) What is the company’s total cost of inventory?
b) Ross White wants to re-consider his decision of buying the brackets and is considering making the brackets in-house. He has determined that set-up cost would be $25 in machinist time and lost production time. Ross estimates that the cost (including labor time and materials) of producing one bracket would be $14.80, and that holding cost will be 10% of this cost.
i) What is Ross Whites’ optimal production quantity?
ii) If Ross White uses the optimal production quantity, what would be his annual cost of inventory?
c) 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.
i) What is the total annual cost of inventory if Ross buys the brackets in lots of 1000at $14.50 each?
ii) Given the options of purchasing the brackets at $15 each, producing them inhouse at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?
d) 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
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