A finished product called A is produced using several different subassemblies. O

Question

A finished product called A is produced using several different subassemblies. One of these subassemblies is subassembly B. subassembly B is made of many parts and one of these parts is part C. the EOQ for producing subassembly B is 400, the order point is 100, and the present inventory is 200. The EOQ for producing part C is 1000, the oreder point is 250, and present inventory is 300.

a. If 50 of product A are to be made, how many of part C should be made?

b. If 150 of product A are to be made, how many of part C should be made?

Explanation / Answer

We start with an assumption that 1 Unit of A is made of 1 Unit of B and 1 Unit of B is made of 1 Unit of C, because we don't have a ratio here. Ideally the answer for Options a and b should be "Cannot be determined" because we don't know the relation between the units of A, B and C.

With the assumption,

a. For producing 50 of A, we need 50 B and 50 C. Since we have 200 unit of B as inventory and 50 unit of C, we don't need to produce any of them. But for C the re-order point is reached (300-50=250) so a trigger is set for producing 1000 qty of C out of this 1000 none will be required for C to meet the production of A.

b. For Producing 150 A, 150 B and 150 C is required. Since After reducing 100 from B, the trigger for reordering is generated 400 unit of B will be produced and Since after 50 consumption of C the trigger for reorder is generated, 1000 unit of C will be produced.

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