# Inventory and Master Production Schedule

Powerful Essays
1681 Words
Grammar
Plagiarism
Writing
Score
Inventory and Master Production Schedule
1. Economic order quantities calculations:

In this case study, I use POQ to calculate Optimal Quantities to Order because some the parts are made by company's plastic-molding machines in an assembly operations and units can be assumed that are received incrementally during production. We also have the following assumptions:

- Only one item is involved because each type of toy has its own assembly line, only one toy can be assembled at a time on this line.
- Annual Demand is known
- Usage rate is constant
- Usage occurs continually but production occurs periodically
- The production rate is constant ( i.e. production rate of Toy Auto is 3500,
Toy Truck, 1750; Toy Robot, 2333)
- There are no quantity discounts

Thus, we have to find out the Set up cost, Holding cost, Demand per year, Demand per week and production rate.

Therefore, we have
Ø Set up Cost:
According to the case study, we have the shop labor rate is the sum of \$6 per hour for wages, 33% fringe benefits and \$6 per hour charged for overhead. Moreover, line 1 has 10 workers who engage in assembly. Thus, the setup cost is:

S = 1 hour * 10 workers * ( \$6 wages + 0.33*6 benefits+ \$6 overhead )= \$140

Ø Holding Cost:

There is some ambiguity here. The subcomponent costs in Exhibit 4 do not always add up to the Cost Each (e.g. the cost for Auto is \$3.9) which is level 0 item cost. So I assumed that Line 1 labor costs (at a fully burdened \$6 + 0.33*6 + \$6 = \$ 14 per hour) were not included.

Hence, Item Cost per unit is the sum o f Cost Each Item and the labor cost per item. You can see the results of Item Cost in Excel worksheet. (The labor cost per item here is equal to labor cost per hour times the hour to make one toy.

For example:

It takes 0.1 hour to make one Auto and the labor cost per hour is \$14. Therefore, the labor cost per item is: C = 0.1 * 14 = \$1.4 )

As a result, we can have the Holding Cost which i s 25% per year:
H = 0.25 * Item Cost per unit
(

## You May Also Find These Documents Helpful

• Better Essays

So, to breakeven, as per budget data, company must sell 13,327 units. 2. Using budget data, what was the total expected cost per unit if all manufacturing and…

• 863 Words
• 4 Pages
Better Essays
• Satisfactory Essays

Simulation results A.1.d. Average total cost per unit Average cost per unit = Average material cost + average labor cost + average utilities cost…

• 256 Words
• 2 Pages
Satisfactory Essays
• Satisfactory Essays

requested 92 engineering tests? The total charged to an in-house manufacturing department would be \$1,046,800. This dollar amount is determined by multiplying the overhead rates of each activity to the amount consumed for that activity and added together for a total. (1,800*70= 126,000), (280*940=263,200) (10*40,000=400,000), (2,800*92=257,600)…

• 389 Words
• 2 Pages
Satisfactory Essays
• Good Essays

Management’s Production Decision Introduction This report will provide insight on what your management team should do concerning production costs. We will examine 2 different scenarios and provide our decision as to which makes most sense. In the first scenario, the total fixed cost of the production is 1,000,000. In the second scenario, the total fixed cost of production is 3,000,000.…

• 697 Words
• 3 Pages
Good Essays
• Good Essays

*The EOQ amount You are the supplier of Hula-Hoops to Wal-Mart, and they are your only consumer. Wal-Mart uses its EOQ to determine that they should buy 2000 units from you each time they order. Given this information which of the following could not be an optimal order quantity for your company?…

• 5984 Words
• 33 Pages
Good Essays
• Good Essays

For the Springfield plant, GG Toys has approximately 5% of the overall overhead and from case fact, we know that GG purchases finished components from local manufacturers and then assemble the components (to form the cradles) using manual labor and there is no machine hours involved in this (Exhibit # 1). So, I recommend GG to keep the existing cost accounting system as the primary cost driver here is labor hours which is being rightly applied as the cost allocation basis. Moreover, ABC methodology is unnecessary because Springfield plant is related to producing only one product.…

• 656 Words
• 6 Pages
Good Essays
• Better Essays

2. (a) How does Wilkerson's existing cost system operate? (5 marks) Wilkerson's current cost system is based on a simple cost accounting system. Material cost is recorded as prices paid to the suppliers for components. Labour rates and fringe benefits were appropriated to products by using the standard run times for each of their three products at a rate of \$25 per hour. Finally, the company allocated the overhead costs for its sole producing department to products as a percentage (300%) of production-run direct labour cost.…

• 2121 Words
• 7 Pages
Better Essays
• Good Essays

The way that I figured out these numbers is by creating a regression to estimate the materials, labor,…

• 585 Words
• 3 Pages
Good Essays
• Satisfactory Essays

The third issue to discuss is how to efficiently use the equipment purchased for the production of the reindeer doll. During the months the reindeer doll is produced leaves the space lying idle from October to June. I think that producing only the reindeer doll will not be efficient. This doll does not use the machinery just bought for an efficiently. I think if the firm produced more toys and considered creating a holiday line it would prove to bring them in more profits. Making more dolls for different occasions using the same machinery and…

• 519 Words
• 3 Pages
Satisfactory Essays
• Good Essays

account direct and indirect costs based on production and sales activity. Each produced unit was charged for material cost based on component costs and labour costs based on production…

• 455 Words
• 2 Pages
Good Essays
• Satisfactory Essays

Student Answer: Schedule of Cost of Goods Manufactured for the Larden Corporation. Beginning Raw Materials Inventory \$70 Add: Purchases of Raw Materials \$170 Raw materials available for use= \$240 Deduct:Ending Raw Materials Inventory \$80 Raw Materials used in Production=\$160 Direct Labor \$210 Manufacturing Overhead \$220 Total Manufacturing Costs \$590 Add:Beginning Work in Process Inventory \$30+\$590=\$620 Deduct:Ending Work in Process Inventory\$20 COST OF GOODS MANUFACTURED=\$600…

• 1151 Words
• 5 Pages
Satisfactory Essays
• Satisfactory Essays

MODELING AND SOLVING INVENTORY CONTROL PROBLEMS IN CUSTOMIZED MASS PRODUCTION ( Reaction Paper ) Due to customer needs for stylish forms, new modern designs, special packaging or better product production, changes in the business environment influence engineering and logistic relations between companies and suppliers. IT technology plays a big part in solving issues concerning the process. Inventory control became today’s vital problem in management supplier demands. The aim of the article is to determine a supplier-stocking–producing policy that will make cost optimal stockpiling possible for an optimal length producing time horizon. The stochastic newsvendor model is a mathematical model in operations management and applied economics used to determine optimal inventory levels. A decision maker needs to decide how many units of limited-useful life products to order for a single selling period because the aim is to have an optimal-length producing time horizon. The optimal solution seen is characterized by a balance between the expected costs of shortage and surplus.…

• 310 Words
• 2 Pages
Satisfactory Essays
• Good Essays

Expectations to reduce cost: The current cycle time of 21 seconds and the total number of 48 workers on the assembly line lead to the per unit labor cost of \$0.80. In order to persist with TI’s policy of consistent cost reduction with improved efficiency, it is extremely crucial to either reduce the number of workers on assembly line or decrease the cycle time.…

• 807 Words
• 3 Pages
Good Essays