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Magazine Chapter 4: 20OQ (page 583)
The MRP gross requirements for Item A are shown here for the next 10 weeks. Lead time for A is three weeks and setup cost is \(10. There is a carrying cost of \)0.01 per unit per week. The beginning inventory is 90 units.
Use the least total cost or the least unit cost lot-sizing method to determine when and for what quantity the first order should be released.
Short Answer
Answer
A Material Requirements Planning (MRP) system is a manufacturing planning as well as decision-making technique for analyzing current stock levels vs. manufacturing capacity as well as the need to make items depending on projections.
Step by step solution
Explanation
Material requirements planning (MRP) is a computer-based information system that aids in the ordering as well as the timing of the parts, pieces, as well as raw materials that comprise a firm's finished product.
Explanation
Lead time = 3 weeks
Set up cost = $10
Carrying Cost = $0.01 per unit
Beginning Inventory = 90 units
The strategy with the lowest overall cost selects the order quantity with the smallest disparity among holding as well as ordering expenses.
Compute the total requirements for each week, which is the amount required after taking the quantity of that product on hand into consideration.
Because on-hand inventory is 90 units, it may meet the gross requirement for weeks 1, 2, as well as 3, which is 30 units for week 1, 50 units for week 2, as well as 10 units for week 3.
The lead time for item A is 3 weeks, therefore its requirement every week must be adjusted accordingly.
The final ending inventory is as follows:
Calculate the total cost of every lot size to meet the demands from week 1 to week 10.
The least overall cost runs size for an MRP schedule:
The proper decision is the least overall price lot-sizing approach, where the difference between the carrying cost and the ordering cost is the smallest.
As a result of the aforementioned table, it is discovered that ordering 250 units in week 4 results in a minimum total cost of $15.30, which is adequate to cover weeks 4 to 8.
As a result, the first order, with number 250 units, must be released in week 4.
Least unit cost lot-sizing method:
The lead time for item A is 3 weeks, therefore its requirement every week must be adjusted accordingly.
The final ending inventory is as follow
Now, calculate the unit cost of each lot size to meet the demands from week 1 to week 10.
Least total cost run size for an MRP schedule:
As a result of the preceding table. When 450 units are ordered in week 4, the minimum unit cost of $0.054 is found. This is enough to cover weeks 4 through 9. As a result, the initial order, with a quantity of 450 units, must be released in week four.
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