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Chapter 4: 2AE (page 584)

Phil would like to consider the costs that his accountants are currently using for inventory carrying and setup for the gearboxes and input shafts. These costs are as follows:

Part

Cost

Gear Box

Step up = \(90 / order

Inventory carrying cost = \) 2/unit/week

Input Shaft

Set up = \(45/ order

Inventory carrying cost = \) 1/unit/week

Short Answer

Expert verified

The total inventory cost carrying costs as well as setup costs for gearboxes as well as input shafts when utilizing Lot for Lot is 1,049

Step by step solution

01

Consider the excel sheet is shown below

The excel sheet is shown below

02

The resultant values are as follows: 

The excel sheet is shown below:


Calculate Inventory cost for Gear Box as shown below:

Formulas showing Gear Box:


The resultant values are as follows:


Calculate Inventory cost for Gear Box as shown below:

Formulas showing input shaft:


The resultant values are as follows:


Determine the total cost of Gear Box and Input Shaft as shown below:

Total cost = Cost of Gear Box + Cost of Input Shaft= 728 + 321= 1049

Hence, the total cost of inventory carrying cost and setup cost to gearboxes and input shafts using Lot for Lot is 1,049

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Most popular questions from this chapter

Ray鈥檚 Satellite Emporium wishes to determine the best order size for its best-selling satellite dish (model TS111). Ray has estimated the annual demand for this model at 1,000 units. His cost to carry one unit is \(100 per year per unit, and he has estimated that each order costs \)25 to place. Using the EOQ model, how many should Ray order each time?

Annual demand for a product is 13,000 units; weekly demand is 250 units with a standard deviation of 40 units. The cost of placing an order is \(100, and the time from ordering to receipt is four weeks. The annual inventory carrying cost is \)0.65 per unit. To provide a 98 percent service probability, what must the reorder point be? Suppose the production manager is told to reduce the safety stock of this item by 100 units. If this is done, what will the new service probability be?

The local supermarket buys lettuce each day to ensure really fresh produce. Each morning any lettuce that is left from the previous day is sold to a dealer that resells it to farmers who use it to feed their animals. This week the supermarket can buy fresh lettuce for \(4.00 a box. The lettuce is sold for \)10.00 a box and the dealer that sells old lettuce is willing to pay $1.50 a box. Past history says that tomorrow鈥檚 demand for lettuce averages 250 boxes with a standard deviation of 34 boxes. How many boxes of lettuce should the supermarket purchase tomorrow?

The accompanying figure shows a production network model with the parts and processing sequences. State clearly in the figure (1) where you would place inventory, (2) where you would perform inspection, and (3) where you would emphasize high-quality output.

Gentle Ben鈥檚 Bar and Restaurant uses 5,000-quart bottles of imported wine each year. The effervescent wine costs \(3 per bottle and is served only in whole bottles because it loses its bubbles quickly. Ben FIgures that it costs \)10 each time an order is placed, and holding costs are 20 percent of the purchase price. It takes three weeks for an order to arrive. Weekly demand is 100 bottles (closed two weeks per year) with a standard deviation of 30 bottles. Ben would like to use an inventory system that minimizes inventory cost and will provide a 95 percent service probability.

a. What is the economic quantity for Ben to order?

b. At what inventory level should he place an order?
See all solutions

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