******HELP***** I HAVE NO IDEA EVEN WHERE TO BEGIN...... You have just completin
ID: 368998 • Letter: #
Question
******HELP***** I HAVE NO IDEA EVEN WHERE TO BEGIN......
You have just completing 20 units of a special subassembly for an electronics manufacturer at a price of $350 per unit. The customer was very pleased with your products and is suggesting a long term contract. If approved, the customer would expect 40 units delivered once every 6 months for the next two years (160 units in total). The first order would be delivered in 6 months (actual production for the forty units would have to begin at least 3 weeks before the order is due. The total cost of the first unit was $564.44 and the cost of the twentieth unit was $279.62. Experience shows that waiting more than a few weeks to repeat to do a repeat order is essentially like starting over with Y1 = $564.44. However, learning effects continue as long as a product is being produced.
A: What is the average cost of the 40 units if they were produced “just in time,” before being shipped out?
B: What would be the average cost of the first 40 unit order if it was produced immediately following the completion of the current order (ignoring inventory holding costs—which would be substantial!)?
C: What would be the average cost of production if the all 160 units were produced immediately after completion of the current order. (again, ignoring inventory holding costs—which would be even more substantial)?
D. Too bad we don’t have more time . . . aren’t you disappointed we can’t look at the effect of holding costs on the tradeoffs described in the last three questions?
ANSWER D CAN BE IGNORED THAT IS JUST MY TEACHERS SENSE OF HUMOR I BELIEVE....
***** CAN SOMEONE PLEASE HELP ME WITH THE FOLLOWING, AS THIS IS ONE OF MY SAMPLE PROBLEMS I USE TO STUDY THE MATERIAL, I WOULD LOVE AS MUCH DETAILS AS POSSIBLE IN EXPLAINING THIS PROBLEM!! THANK YOU SO MUCH IN ADVANCE FOR ALL YOUR HELP!!!M
Explanation / Answer
Answer 1: If they produce Just in Time, as given in the case the production cost for first 20 units will be at the rate of $564.44 and next 20 units will be at the rate of $279.62.
So as the total first order is on 40 units so verage cost will be : {(20*564.44) + (20* 279.62) }/40 = $422.03
Answer 2: The average proce will be at $350 per unit as the 1st batch of 20 units was produced at the rate of $350 per unit , as the waiting time between to production cycle is more than few weeks time the production cost change .
Answer 3: Average cost will be at $350 per unit and total cost will be $350 * 160 =$56000
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