Practical Operations Management
Practical Operations Management
2nd Edition
ISBN: 9781939297136
Author: Simpson
Publisher: HERCHER PUBLISHING,INCORPORATED
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Chapter 11, Problem 29P

a

Summary Introduction

Interpretation: Number of bows at the end of fourth month is to be calculated.

Concept Introduction: Weighted average method is the method in which different numerical value is given to variable depending upon its importance. Higher the importance, larger is the numerical value given.

a

Expert Solution
Check Mark

Explanation of Solution

All figures are in ‘000.

For month 1:

Calculation of average inventory::

  Averageinventory=(Bi+Ei)/2

Where,

  Bi = beginning inventory

  Ei = ending inventory

  Totalinventorycost=$1×totalinventoryfor4months=$1×(15+35+5)×1000=85000

Where,

  Pi = Production during month

  Di = Demand during month

  A1=(0+15)/2=7.5

Average inventory for 1st moth is 7500.

For month 2:

Calculation of average inventory::

  Averageinventory=(Bi+Ei)/2

Where,

  Bi = beginning inventory

  Ei = ending inventory

  B2=15E2=Bi+PiDiEi=15+255=35

Where,

  Pi = Production during month

  Di = Demand during month

  A2=(15+35)/2=25

Average inventory for 2nd month is25000.

For month 3:

Calculation of average inventory::

  Averageinventory=(Bi+Ei)/2

Where,

  Bi = beginning inventory

  Ei = ending inventory

  B3=35E3=B3+P3D3E3=35+2530=30

Where,

  Pi = Production during month

  Di = Demand during month

  A3=(15+35)/2=32.5

Average inventory for 3rd month is 32500.

For month 4:

Calculation of average inventory::

  Averageinventory=(Bi+Ei)/2

Where,

  Bi = beginning inventory

  Ei = ending inventory

  B4=0E4=Bi+PiDiE4=30+2550=5

Where,

  Pi = Production during month

  Di = Demand during month

  A4=(30+5)/2=32.5

Average inventory for 2nd month is 32500.

Number of bows at the end of the month is 5000

b

Summary Introduction

Interpretation: The month that has the highest inventory is to be determined.

Concept Introduction: Weighted average method is the method in which different numerical value is given to variable depending upon its importance. Higher the importance, larger is the numerical value given.

b

Expert Solution
Check Mark

Explanation of Solution

  E4=Bi+PiDiE4=30+2550=5

Fouth month has the highest inventory as ending inventory is 5000.

c

Summary Introduction

Interpretation: Total inventory cost is to be calculated.

Concept Introduction: Holding cost or inventory cost is the cost of warehousing in which unsold goods are kept. It includes transportation, warehousing, insurance etc.

c

Expert Solution
Check Mark

Explanation of Solution

Cost of inventory = $1 per unit.

  Totalinventorycost=$1×totalinventoryfor4months=$1×(15+35+5)×1000=85000

Total inventory cost is $85000

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