Race One Motors is an Indonesian car manufacturer. At its largest manufacturing?
ID: 431870 • Letter: R
Question
Race One Motors is an Indonesian car manufacturer. At its largest manufacturing? facility, in? Jakarta, the company produces subcomponents at a rate of
305
per? day, and it uses these subcomponents at a rate of
12,500
per year? (of 250 working?days). Holding costs are
?$3
per item per? year, and ordering costs are
?$31
per order.
?a) What is the economic production? quantity?
nothing
units ?(round your response to two decimal? places).
b) How many production runs per year will be made? (round your responce two decimals)
c) What will be the maximum inventory level? ( round to two decimals)
d) What percentage of time will the facility be producing components? (round to two decimals)
e) what is the annual cost of ordering and holding inventory? (round to two decimals)
Explanation / Answer
Annual Demand, D = 12,500
Daily demand rate, d = 12500/250 = 50 per day
Daily production rate, p = 305 per day
Holding cost, H = $ 3 per item per day
Ordering cost, S = $ 31 per order
a) Economic Production Quantity (EPQ) = SQRT(2DS/(H*(1-d/p)))
= SQRT(2*12500*31/(3*(1-50/305)))
= 555.87
b) Number of production runs per year = D/Q = 12500/555.87 = 22.49
c) Maximum inventory level = Q*(1-d/p) = 555.87*(1-50/305) = 464.74
d) Percentage of time facility will producing components = d/p = 0.16
e) Annual cost of ordering and holding inventory = Number of production runs per year * Ordering cost + (Maximum inventory / 2) * holding cost = (D/Q)*H + (Q*(1-d/p)/2)*H
= 22.49*31 + (464.74/2)*3
= $ 1394.30
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