Florida Mining Equipment DepotFlorida Mining Equipment Depot conducts recapitali
ID: 334812 • Letter: F
Question
Florida Mining Equipment DepotFlorida Mining Equipment Depot conducts recapitalization (or overhaul) operations on large, heavy mining equipment. Vehicles scheduled for periodic overhaul and repair are brought to the depot and a complete overhaul returns them back to the minim company in a "like new" condition. In order for operations to run smoothly, spare parts must be available so that the production line does not idle. Below is a table of three critical parts used in the overhaul process. The annual holding and backorder costs are given below. The backorder cost for each item is a one-time backorder cost (the cost does not accrue over time) and represents the cost of expediting that specific part (backorder costs may differ from item to item based upon the specific characteristics of the item and the expediting procedures). The holding cost is the cost of holding one unit of that particular part number in inventory for one year. Assume 52 weeks per year.The current order quantity (or lot size) for part 1003 is 35 units. What is the optimal order quantity (or lot size) for part 1003? Avg Std Dev Current On Annual Unit Weekly Weekly Lead Time Hand Ordering Holding Backorder Part CostDmd Dmd (in weeks) Inventory CostCostCost 1001 $8.50 19 1002 $47.25 7 1003 $202.50 0.5 0.8 $125 $55 $1,000 112$225$45 $1,000 $175 $125 $1,000 38 6 5 2 16 6 1. 40 2. 8 4. 3Explanation / Answer
For 1003
Average Weekly Demand, d = 0.5 unit
Annual Demand = 0.5*52 = 26 unit
Current inventory on hand = 3
So Actual Annual Demand, D = 26-3 = 23 unit
Order cost, S = 175
Annual Holding Cost, IC = 125
Optimal Order quantity , EOQ, Q = sqrt(2*D*S/IC) =sqrt(2*23*175/125) = sqrt(64.4) = 8.02 = 8
Answer = 8
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