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17 March, 09:55

Arthur Meiners is the production manager of Wheel - Rite, a small producer of metal parts. Wheel-Rite supplies Cal - Tex, a larger assembly company, with 10,000 wheel bearings each year. This order has been stable for some time. Setup cost for Wheel-Rite is $40, and holding cost is $.60 per wheel bearing per year. Wheel-Rite can produce 500 wheel bearings per day. Cal - Tex is a just-in-time manufacturer and requires that 50 bearings be shipped to it each business day.

Required:

a) What is the optimum production quantity?

b) What is the maximum number of wheel bearings that will be in inventory at Wheel-Rite?

c) How many production runs of wheel bearings will Wheel-Rite have in a year?

d) What is the total setup plus holding cost for Wheel-Rite?

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Answers (2)
  1. 17 March, 10:16
    0
    a) POQ = sqrt[2DS / H (1 - d/p) ] = sqrt[2*10000*40 / 0.6 (1-50/500) ] = 1217

    ; b) 1217 (1-50/500)

    c) 10000/1217 = 8.22

    d) Setup = 8.22*40=328.8Hold. cost = 1/2HQ (1-d/p) = ½*0.6*1217 (1-50/500) = 3285.9Setup+HC=3614.7
  2. 17 March, 10:20
    0
    A.$1,217

    B.$1,217 (1-50/500)

    C. 10000/1217 = 8.22

    D.$3614.7

    Explanation:

    a)

    POQ = sqrt[2DS / H (1 - d/p) ]

    = sqrt[2*10000*40 / 0.6 (1-50/500) ]

    = $1,217

    b)

    $1,217 (1-50/500)

    c)

    10000/1217 = 8.22

    d)

    Setup = 8.22*40=328.8

    Hold. cost = 1/2HQ (1-d/p) = ½*0.6*1217 (1-50/500) = 3285.9

    Setup+HC=$3614.7
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