
A company is about to begin production of a new product. The manager of the department that will produce 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 will be used daily in assembling the final product. Assembly will take 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 nm, at a cost of $300. Inventory holding costs will be $10 a year.
a. What runs quantity should be used to minimize total annual costs?
b. How many days does it take to produce the optimal run quantity?
c. What is the average amount of inventory?
d. If the manager wants to run another job between runs of this item, and needs a minimum of 10 days per cycle for the other work, will there be enough time?
e. Given your answer to part d, the manager wants to explore options that will allow this other job to be performed using this equipment. Name three options the manager can consider.
f. Suppose the manager decides to increase the new size the new product. How many additional units would be needed to just accommodate the other job? How much will that increase the total annual cost?
a)

To determine: The run quantity to minimize the total cost.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
Answer to Problem 11P
Explanation of Solution
Given information:
Formula:
Calculation of run quantity to minimize the total cost:
The optimal run size is calculated by dividing the product of 2 and 200,000 and 300 with 10 and taking square root which gives the resultant value as 1095 units and 200 is divided with the difference of 200 and 80 and square root is taken which gives 1.290, both values are multiplies which gives the optimal run size as 1414 units.
Hence, the run quantity to minimize the total cost is 1,414 units.
b)

To determine: The number of days to produce optimal run quantities.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
Answer to Problem 11P
Explanation of Solution
Given information:
Formula:
Calculation of days to produce optimal run quantities:
The number of days to produce optimal run quantity is calculated by dividing 1,414 with 200 which gives 7.07 days.
Hence, the number of days to produce optimal run quantities is 7.70 days.
c)

To determine: The average inventory.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
Answer to Problem 11P
Explanation of Solution
Given information:
Formula:
Calculation of average inventory:
The average inventory is calculated by dividing 848.4 by 2 which yields 424.2 units.
Hence, the average inventory is 424.2 units.
d)

To explain: Whether there is adequate time for another job between the run of items.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
Answer to Problem 11P
Explanation of Solution
Given information:
Formula:
Calculation to check whether there is adequate time to do the job between the production batches:
The cycle time is calculated by dividing 1,414 with 80 which yields the resultant as 17.68 days.
The run time is calculated by dividing 1,414 by 200 and adding the resultant with setup time which yields 8.07 days.
Consumption time is calculated by subtracting cycle time of 17.68 with the consumption time of 8.07 which yields the resultant as 9.61 days which is not sufficient since other job requires 10 days.
Hence, there will not be adequate time for the other job.
e)

To explore: Three options for managers that will allow him to do other job.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
Explanation of Solution
Given information:
Three options for managers that will allow him to do other job:
The three options for manager to explore the ways to do other jobs are,
- The setup time for other job can be shortened.
- Increase the run time of the new product which allows longer run time between runs which is there less need to run the component.
- Reducing the run time for other jobs.
f)

To determine: The addition units produced from the new product and the total annual cost.
Introduction: Inventory is a stock or store of goods. Every company store lots of goods as inventory which will be used during replenishment periods. Management of inventory is so much essential to manage cost and also to reduce cost.
Answer to Problem 11P
Explanation of Solution
Given information:
Formula:
Calculation of addition units produced from the new product and the total annual cost:
The additional units produced is computed by finding the value of Qp
Solving for Qp, we get the values as,
The additional units per run = 1,467 – 1,414 = 53 units per run.
The additional unit per run is calculated by subtracting 1,467 and 1,414 which gives 53 units per run.
Increase in total cost:
Difference in total cost:
The increase in total cost is calculated by calculating the difference between $8,490.98 and $8,485.28 which is $5.70 per year.
Hence, additional units produced and increase in cost is 53 units per run and $ 5.7 per year.
Want to see more full solutions like this?
Chapter 13 Solutions
Operations Management (Comp. Instructor's Edition)
- Sarah Anderson, the Marketing Manager at Exeter Township's Cultural Center, is conducting research on the attendance history for cultural events in the area over the past ten years. The following data has been collected on the number of attendees who registered for events at the cultural center. Year Number of Attendees 1 700 2 248 3 633 4 458 5 1410 6 1588 7 1629 8 1301 9 1455 10 1989 You have been hired as a consultant to assist in implementing a forecasting system that utilizes various forecasting techniques to predict attendance for Year 11. a) Calculate the Three-Period Simple Moving Average b) Calculate the Three-Period Weighted Moving Average (weights: 50%, 30%, and 20%; use 50% for the most recent period, 30% for the next most recent, and 20% for the oldest) c) Apply Exponential Smoothing with the smoothing constant alpha = 0.2. d) Perform a Simple Linear Regression analysis and provide the adjusted…arrow_forwardRuby-Star Incorporated is considering two different vendors for one of its top-selling products which has an average weekly demand of 70 units and is valued at $90 per unit. Inbound shipments from vendor 1 will average 390 units with an average lead time (including ordering delays and transit time) of 4 weeks. Inbound shipments from vendor 2 will average 490 units with an average lead time of 2 weeksweeks. Ruby-Star operates 52 weeks per year; it carries a 4-week supply of inventory as safety stock and no anticipation inventory. Part 2 a. The average aggregate inventory value of the product if Ruby-Star used vendor 1 exclusively is $enter your response here.arrow_forwardSam's Pet Hotel operates 50 weeks per year, 6 days per week, and uses a continuous review inventory system. It purchases kitty litter for $13.00 per bag. The following information is available about these bags: > Demand 75 bags/week > Order cost = $52.00/order > Annual holding cost = 20 percent of cost > Desired cycle-service level = 80 percent >Lead time = 5 weeks (30 working days) > Standard deviation of weekly demand = 15 bags > Current on-hand inventory is 320 bags, with no open orders or backorders. a. Suppose that the weekly demand forecast of 75 bags is incorrect and actual demand averages only 50 bags per week. How much higher will total costs be, owing to the distorted EOQ caused by this forecast error? The costs will be $higher owing to the error in EOQ. (Enter your response rounded to two decimal places.)arrow_forward
- Yellow Press, Inc., buys paper in 1,500-pound rolls for printing. Annual demand is 2,250 rolls. The cost per roll is $625, and the annual holding cost is 20 percent of the cost. Each order costs $75. a. How many rolls should Yellow Press order at a time? Yellow Press should order rolls at a time. (Enter your response rounded to the nearest whole number.)arrow_forwardPlease help with only the one I circled! I solved the others :)arrow_forwardOsprey Sports stocks everything that a musky fisherman could want in the Great North Woods. A particular musky lure has been very popular with local fishermen as well as those who buy lures on the Internet from Osprey Sports. The cost to place orders with the supplier is $40/order; the demand averages 3 lures per day, with a standard deviation of 1 lure; and the inventory holding cost is $1.00/lure/year. The lead time form the supplier is 10 days, with a standard deviation of 2 days. It is important to maintain a 97 percent cycle-service level to properly balance service with inventory holding costs. Osprey Sports is open 350 days a year to allow the owners the opportunity to fish for muskies during the prime season. The owners want to use a continuous review inventory system for this item. Refer to the standard normal table for z-values. a. What order quantity should be used? lures. (Enter your response rounded to the nearest whole number.)arrow_forward
- In a P system, the lead time for a box of weed-killer is two weeks and the review period is one week. Demand during the protection interval averages 262 boxes, with a standard deviation of demand during the protection interval of 40 boxes. a. What is the cycle-service level when the target inventory is set at 350 boxes? Refer to the standard normal table as needed. The cycle-service level is ☐ %. (Enter your response rounded to two decimal places.)arrow_forwardOakwood Hospital is considering using ABC analysis to classify laboratory SKUs into three categories: those that will be delivered daily from their supplier (Class A items), those that will be controlled using a continuous review system (B items), and those that will be held in a two bin system (C items). The following table shows the annual dollar usage for a sample of eight SKUs. Fill in the blanks for annual dollar usage below. (Enter your responses rounded to the mearest whole number.) Annual SKU Unit Value Demand (units) Dollar Usage 1 $1.50 200 2 $0.02 120,000 $ 3 $1.00 40,000 $ 4 $0.02 1,200 5 $4.50 700 6 $0.20 60,000 7 $0.90 350 8 $0.45 80arrow_forwardA part is produced in lots of 1,000 units. It is assembled from 2 components worth $30 total. The value added in production (for labor and variable overhead) is $30 per unit, bringing total costs per completed unit to $60 The average lead time for the part is 7 weeks and annual demand is 3800 units, based on 50 business weeks per year. Part 2 a. How many units of the part are held, on average, in cycle inventory? enter your response here unitsarrow_forward
- assume the initial inventory has no holding cost in the first period and back orders are not permitted. Allocating production capacity to meet demand at a minimum cost using the transportation method. What is the total cost? ENTER your response is a whole number (answer is not $17,000. That was INCORRECT)arrow_forwardRegular Period Time Overtime Supply Available puewag Subcontract Forecast 40 15 15 40 2 35 40 28 15 15 20 15 22 65 60 Initial inventory Regular-time cost per unit Overtime cost per unit Subcontract cost per unit 20 units $100 $150 $200 Carrying cost per unit per month 84arrow_forwardassume that the initial inventory has no holding cost in the first period, and back orders are not permitted. Allocating production capacity to meet demand at a minimum cost using the transportation method. The total cost is? (enter as whole number)arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Contemporary MarketingMarketingISBN:9780357033777Author:Louis E. Boone, David L. KurtzPublisher:Cengage Learning
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage LearningMarketingMarketingISBN:9780357033791Author:Pride, William MPublisher:South Western Educational PublishingManagement, Loose-Leaf VersionManagementISBN:9781305969308Author:Richard L. DaftPublisher:South-Western College Pub



