Ross White's machine shop uses 2500 brackets during the course of a year, and this usage is relativelyconstant throughou
Posted: Tue Jul 12, 2022 12:40 pm
Ross White's machine shop uses 2500 brackets during the course of a year, and this usage is relativelyconstant throughout the year. These brackets are purchased from a supplier 100 miles away for $15 each, and the lead time is 2 days. The holding cost perbracket per year is $1.50 (or 10% of the unit cost) and the ordering cost is $18.75. There are 250 working days per year.
a) i) What is Ross White's optimal order quantity?
ii) What is the company's total annual cost of inventory?
b) Ross White wants to re-consider his decision of buying the brackets and is considering making the brackets in-house. He has determined that set-up cost would be $25 in machinist time and lost production time. Ross estimates that the cost (including labor time and materials) of producing one bracket would be S 14.80, and that holding cost will be 10% of this cost.
i) What is Ross Whites' optimal production quantity?
ii) If Ross White uses the optimal production quantity, what would be his annual total cost of inventory?
c) Upon hearing that Ross White is considering the producing the brackets in-house, the supplier has notified Ross that the purchase price would drop from $15 per bracket to $14.50 per bracket if Ross purchasethe brackets in lots of 1000.
i) What is the total annual cost of inventory if Ross buys the brackets in lots of 1000 at $14.50 each?
ii) Given the options of purchasing the brackets at $15 each, producing them in-house at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?
a) i) What is Ross White's optimal order quantity?
ii) What is the company's total annual cost of inventory?
b) Ross White wants to re-consider his decision of buying the brackets and is considering making the brackets in-house. He has determined that set-up cost would be $25 in machinist time and lost production time. Ross estimates that the cost (including labor time and materials) of producing one bracket would be S 14.80, and that holding cost will be 10% of this cost.
i) What is Ross Whites' optimal production quantity?
ii) If Ross White uses the optimal production quantity, what would be his annual total cost of inventory?
c) Upon hearing that Ross White is considering the producing the brackets in-house, the supplier has notified Ross that the purchase price would drop from $15 per bracket to $14.50 per bracket if Ross purchasethe brackets in lots of 1000.
i) What is the total annual cost of inventory if Ross buys the brackets in lots of 1000 at $14.50 each?
ii) Given the options of purchasing the brackets at $15 each, producing them in-house at $14.80, and taking advantage of the discount, what is your recommendation to Ross White?