EBK PRINCIPLES OF OPERATIONS MANAGEMENT
EBK PRINCIPLES OF OPERATIONS MANAGEMENT
11th Edition
ISBN: 9780135175644
Author: Munson
Publisher: VST
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 12, Problem 18P

a)

Summary Introduction

To calculate: The economic production quantity (EPQ).

Introduction:

Economic production quantity (EPQ):

The economic production quantity is used to determine the amount a company or a retail outlet should purchase at every order so as to minimize the associated total inventory costs. It is done by balancing the holding cost and the ordering cost.

a)

Expert Solution
Check Mark

Answer to Problem 18P

The economic production quantity (EPQ) is 671 units.

Explanation of Solution

Given information:

Annual Demand (D) = 12,500 units

Number of working days (N) = 250 / year

Holding cost (H) = $2 / unit / year

Ordering cost (S) = 30 / order

Daily production (p) = 300 / day

Daily demand(d)=Annual demandNumber of days=12,500250=50 days

Formula to calculate EPQ:

EPQ=2×D×SH[1-dp]

Calculation of EPQ:

EPQ=2×12,500×302[150300]=750,0002[250300]=750,0002×0.833

=750,0001.666=450,180.07=670.95=671 units

Hence, the economic production quantity (EPQ) is 671 units.

b)

Summary Introduction

To calculate: The number of production runs per year.

Introduction:

Production runs:

The production run is the development of similar or associated goods by utilizing a particular approach or processes.

b)

Expert Solution
Check Mark

Answer to Problem 18P

The number of production runs per yearis 18.63.

Explanation of Solution

Given information:

Annual Demand (D) = 12,500 units

Number of working days (N) = 250 / year

Holding cost (H) = $2 / unit / year

Ordering cost (S) = 30 / order

Daily production (p) = 300 / day

Daily demand(d)=Annual demandNumber of days=12,500250=50 days

Formula to calculate number of production runs:

Number of production runs=DEPQ

Calculation of number of production runs:

Number of production runs=12,500671=18.628=18.63

Hence, the number of production runs per year is 18.63.

c)

Summary Introduction

To calculate: The maximum inventory level.

Introduction:

Maximum inventory level:

The maximum inventory level is the level of inventory in a firm which should not be exceeded at any circumstances. It is to ensure that the cost of capital is not increased.

c)

Expert Solution
Check Mark

Answer to Problem 18P

The maximum inventory level is 559 units.

Explanation of Solution

Given information:

Annual Demand (D) = 12,500 units

Number of working days (N) = 250 / year

Holding cost (H) = $2 / unit / year

Ordering cost (S) = 30 / order

Daily production (p) = 300 / day

Daily demand(d)=Annual demandNumber of days=12,500250=50 days

Formula to calculate maximum inventory level:

Maximum inventory level=EPQ×(1dp)

Calculation of maximum inventory level:

Maximum inventory level=671×(150300)=671×250300=559.16=559 units

Hence, the maximum inventory level is 559 units.

d)

Summary Introduction

To determine: The percentage of time the facility will be producing components.

d)

Expert Solution
Check Mark

Answer to Problem 18P

The percentage of time the facility will be producing componentsis 16.7%.

Explanation of Solution

Given information:

Annual Demand (D) = 12,500 units

Number of working days (N) = 250 / year

Holding cost (H) = $2 / unit / year

Ordering cost (S) = 30 / order

Daily production (p) = 300 / day

Daily demand(d)=Annual demandNumber of days=12,500250=50 days

Formula to calculate days of demand:

Days of demand=NNumber of production runs

Formula to calculate days of production:

Days in production=EPQp

Calculation of days of demand satisfied by each production run:

Days of demand=NNumber of production runs=25018.63=13.419=13.42 days

Calculation of days in production for each order:

Days in production=EPQp=671300=2.236=2.24 days

Calculation of percent time of production:

The percentage of the time the facility is producing components is calculated by dividing the days in production by the days of demand.

Percent time of production=Days in productionDays of demand×100=2.2413.42×100=16.69=16.7%

Hence, the percentage of time the facility will be producing components is 16.7%.

e)

Summary Introduction

To determine: The annual cost of ordering and holding inventory.

e)

Expert Solution
Check Mark

Answer to Problem 18P

The annual cost of ordering and holding inventory is $1,117.90

Explanation of Solution

Given information:

Annual Demand (D) = 12,500 units

Number of working days (N) = 250 / year

Holding cost (H) = $2 / unit / year

Ordering cost (S) = 30 / order

Daily production (p) = 300 / day

Daily demand(d)=Annual demandNumber of days=12,500250=50 days

Formula to calculate the annual cost of ordering and holding inventory:

Annual cost=(Number of production runs×S)+(Maximum inventory level2×H)

Calculation of annual cost of ordering and holding inventory:

Annual cost=(18.63×30)+(5592×2)=558.9+559=$1,117.90

Hence, the annual cost of ordering and holding inventory is $1,117.90.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
“Implementing a Performance Management Communication Plan at Accounting, Inc.” Evaluate Accounting Inc.’s communication plan.  Specifically, does it answer all of the questions that a good communication plan should answer? Which questions are left unanswered?  How would you provide answers to the unanswered questions? “Implementing an Appeals Process at Accounting, Inc.”   If you were to design an appeals process to handle these complaints well, what would be the appeal process?  Describe the recommended process and why.
The annual demand for water bottles at Mega Stores is 500 units, with an ordering cost of Rs. 200 per order. If the annual inventory holding cost is estimated to be 20%. of unit cost, how frequently should he replenish his stocks? Further, suppose the supplier offers him a discount on bulk ordering as given below. Can the manager reduce his costs by taking advantage of either of these discounts? Recommend the best ordering policy for the store. Order size Unit cost (Rs.) 1 – 49 pcs. 20.00 50 – 149 pcs. 19.50 150 – 299 pcs. 19.00 300 pcs. or more 18.00
Help answer showing level work and formulas

Chapter 12 Solutions

EBK PRINCIPLES OF OPERATIONS MANAGEMENT

Ch. 12 - Prob. 10DQCh. 12 - Prob. 11DQCh. 12 - Explain the following: All things being equal, the...Ch. 12 - Prob. 13DQCh. 12 - Prob. 14DQCh. 12 - Prob. 15DQCh. 12 - When demand is not constant, the reorder point is...Ch. 12 - Prob. 17DQCh. 12 - State a major advantage, and a major disadvantage,...Ch. 12 - L. Houts Plastics it a large manufacturer of...Ch. 12 - Prob. 2PCh. 12 - Jean-Mane Bourjollys restaurant has the following...Ch. 12 - Lindsay Electronics, a small manufacturer of...Ch. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - William Sevilles computer training school, in...Ch. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Matthew Liotines Dream Store sells beds and...Ch. 12 - Southeastern Bell stocks a certain switch...Ch. 12 - Lead time for one of your fastest-moving products...Ch. 12 - Annual demand for the notebook binders at Duncans...Ch. 12 - Thomas Kratzer is the purchasing manager for the...Ch. 12 - Joe Henrys machine shop uses 2,500 brackets during...Ch. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Cesar Rego Computers, a Mississippi chain of...Ch. 12 - Prob. 22PCh. 12 - Prob. 23PCh. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - M. P. VanOyen Manufacturing has gone out on bid...Ch. 12 - Chris Sandvig Irrigation, Inc., has summarized the...Ch. 12 - Prob. 28PCh. 12 - Prob. 29PCh. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Prob. 34PCh. 12 - Prob. 35PCh. 12 - Prob. 36PCh. 12 - Prob. 37PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Barbara Flynn is in charge of maintaining hospital...Ch. 12 - Prob. 42PCh. 12 - Authentic Thai rattan chairs (shown in the photo)...Ch. 12 - Prob. 44PCh. 12 - Prob. 45PCh. 12 - Prob. 46PCh. 12 - Prob. 47PCh. 12 - Gainesville Cigar stocks Cuban agars that have...Ch. 12 - A gourmet coffee shop in downtown San Francisco is...Ch. 12 - Prob. 50PCh. 12 - Prob. 51PCh. 12 - Henrique Correas bakery prepares all its cakes...Ch. 12 - Prob. 53PCh. 12 - Prob. 1CSCh. 12 - Prob. 2CSCh. 12 - Prob. 3CSCh. 12 - Prob. 1.1VCCh. 12 - Prob. 1.2VCCh. 12 - Prob. 1.3VCCh. 12 - Prob. 1.4VCCh. 12 - Prob. 1.5VCCh. 12 - Prob. 1.6VCCh. 12 - Prob. 1.7VCCh. 12 - Prob. 2.1VCCh. 12 - Prob. 2.2VCCh. 12 - Prob. 2.3VCCh. 12 - Prob. 2.4VCCh. 12 - Inventory Control at Wheeled Coach Controlling...Ch. 12 - Prob. 3.2VCCh. 12 - Inventory Control at Wheeled Coach Controlling...
Knowledge Booster
Background pattern image
Operations Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Inventory Management | Concepts, Examples and Solved Problems; Author: Dr. Bharatendra Rai;https://www.youtube.com/watch?v=2n9NLZTIlz8;License: Standard YouTube License, CC-BY