The following table shows the weekly requirements for item \"K\" at Adrenaline S

Question

The following table shows the weekly requirements for item "K" at Adrenaline Sports Manufacturing Company (ASM); this item is manufactured internally at ASM's manufacturing facility in St Paul, MN The cost of set-up for manufacturing a lot of "K" items is S=dollar50; the cost of holding a unit of "K" in inventory for one week is H= dollar1 Calculate The number of production lots to produce during the 12-week planning period The schedule of production (when to start producing each of the lots) The size of the lots to be produced each time The total Cost of the strategy Do that for each of the following lot-sizing strategies: Lot-for-Lot approach (L4L) EOQ Silver-Meal approach Least Unit Cost, LUC Which strategy you would recommend for lot sizing? Why is that?

Explanation / Answer

Hence, I will recommend EOQ strategy as it produces the lowest cost.

week 1 2 3 4 5 6 7 8 9 10 11 12 demand 150 60 150 120 10 70 130 60 20 80 250 100 Demand, D 1200 Setup Cost, S ($) 50 Holding Cost /unit/week ($), H 1 1) L4L a) No. of Production Lots to produce during the 12-week planning period = 12 (NOTE: for L4L, the production is as per the requirement, hence for every weeks demand, another lot will be produced b) Production Schedue: week 1 2 3 4 5 6 7 8 9 10 11 12 Schedule 150 60 150 120 10 70 130 60 20 80 250 100 c) Lot size week 1 2 3 4 5 6 7 8 9 10 11 12 Lot size 150 60 150 120 10 70 130 60 20 80 250 100 d) Total Cost total Setup Cost 600 (=$50*12 setups) total Holding Cost 0 (no inventory carried forward) Hence, Total Cost = $600

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