The top four questions are to help you figure out the bottom four :) Those are t

Question

The top four questions are to help you figure out the bottom four :) Those are the ones I need help with. Thank you!

Part 3 of 3 - Part 3

Ross White’s machine shop uses 2,500 brackets during the course of a year, and this usage is relatively constant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost per bracket per year is $1.50 (or 10% of the unit cost) and the ordering cost per order is $18.75. There are 250 working days per year.

Now, Ross White wants to reconsider his decision of buying the brackets and is considering making the brackets in-house. He has determined that setup costs would be $25 in machinist time and lost production time, and 50 brackets could be produced in a day once the machine has been set up. Ross estimates that the cost (including labor time and materials) of producing one bracket would be $14.80. The holding cost would be 10% of this cost.

Question 8 of 14

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Question 9 of 14

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Question 10 of 14

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Question 11 of 14

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Question 12 of 14

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Question 13 of 14

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Question 14 of 14

5.0 Points

If the lead time is one-half day, the reorder point (ROP) is  units. (Please round to an integer and include no units.)

The top four questions are to help you figure out the bottom four :) Those are the ones I need help with. Thank you!

Part 3 of 3 - Part 3

Explanation / Answer

Since, there are multiple parts to the question, I have answered the first five (from Question to Question 12).

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Question 8:

The daily demand rate is determined as below:

Daily Demand Rate = Total Demand for the Year/Working Days Per Year

Using the values provided in the question in the above formula, we get,

Daily Demand Rate = 2,500/250 = 10 units per day

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Question 9:

The optimal production quantity is arrived as below:

Optimal Production Quantity = [(2*Annual Demand*Setup Costs)/(Cost of Holding/(1-Daily Demand Rate/Total Production Per day)]^(1/2)

Here, Annual Demand = 2,500 units, Setup Costs = $25, Cost of Holding = 14.80%*10% = $1.48, Daily Demand Rate = 10 and Total Production Per Day = 50

Using these values in the above formula, we get,

Optimal Production Quantity = [(2*2,500*25)/(1.48*(1-10/50))]^(1/2) = 324.92 or 325 units

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Question 10:

The number of days to produce optimal production quantity is calculated as below:

Number of Days to Produce Optimal Production Quantity = Optimal Production Quantity/Total Production Per Day = 324.92/50 = 6.5 days

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Question 11:

During the time producing the optimal quantity, there will be about 65 brackets sold.

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Explanation:

The total number of brackets sold during the time producing the optimal quantity is determined as below:

Total Number of Brackets Sold = Daily Demand Rate*6.5 = 10*6.5 = 65 units

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Question 12:

The maximum inventory level, the average inventory level, and the annual holding cost is calculated as below:

Maximum Inventory Level = Optimal Production Quantity*(1-Daily Demand Rate/Total Production Per Day) = 324.92*(1-10/50) = 259.94 or 260 units

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Average Inventory Level = Maximum Inventory Level*1/2 = 259.94*1/2 = 129.97 or 130 units

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Annual Holding Cost = Average Inventory Level*Cost of Holding = 129.97*1.48 = 192.35 or 192 units

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